Suit filed not to be treated as barred by limitation.

V. KANAGARAJ, J.

For the The above appeal suit is directed against the judgment and decree dated November 9, 1983, made in O.S. No. 9313 of 1981 by the VIth Additional judge, City Civil Court, Madras, thereby decreeing the suit in favour of the plaintiff-Corporation directing the defendant-bank to pay Rs. 40, 000 with interest thereon at 20 per cent. per annum from August 7, 1981, till the date of decree and at 6 per cent. per annum from that date onwards till the date of realisation and with proportionate costs.

The suit filed by the respondent herein in the court below is for a decree directing the defendant to pay the plaintiff a sum of Rs. 68, 000 together with interest on Rs. 40, 000 at 20 per cent. per annum from the date of plaint till the date of realisation and with costs.

So far as the averments of the plaint are concerned, the plaintiff-Corporation entered into a contract dated August 29, 1977, with Indecor, Broadway, Madras, for supply of timber of certain specifications with the condition that the said company should furnish performance guarantee in the form of a bank guarantee of a nationalised bank and the defendant-bank offered the guarantee in No. 33 of 1977, dated August 29, 1977, and undertook to indemnify and keep indemnified the plaintiff-Corporation to the extent of Rs. 40, 000 against any loss, claim or damage, etc., caused to the plaintiff-Corporation by reason of any breach of contract by Indecor that the defendant-bank further agreed to pay to the plaintiff on demand and without any demur any sum becoming payable to the Corporation under the agreement, the plaintiff being the deciding factor whether any breach has in fact been committed or not and the said guarantee to remain in force till October 30, 1977, or till the expiry of the extended period and it shall continue to be in force till all the dues to the plaintiff-Corporation are duly and fully paid and till the claim satisfied or discharged. The guarantee period got extended from time to time and ultimately, till March 31, 1978, Indecor did not fulfil the obligations as per the contract and the plaintiff was constrained to invoke the bank guarantee as per its letter dated February 10, 1978, and on March 31, 1978.The further averments of the plaint are that, Indecor filed a suit in April, 1978, in the City Civil Court, Madras, against the plaintiff and the defendant, wherein, an order to maintain the status quo had also been passed and the said suit got stayed by the High Court; that on August 6, 1981, the plaintiff sent a telegram to the defendant-bank for extension of the validity of the bank guarantee, but taking shelter of the interim order to maintain status quo, the defendant-bank refused to comply with and since the plaintiff has already invoked the bank guarantee, the defendant-bank is liable to pay the amounts due under the guarantee without any demur; that since the defendant-bank has failed to pay the amount, it becomes liable to pay the interest also at 20 per cent. on the principal sum of Rs. 40, 000 from January 1, 1978, up to the date of the suit which is arrived at Rs. 28, 000 and, therefore, liable to pay Rs. 68, 000 with interest at 6 per cent. from the date of claim, till the date of realisation of the said amount.

In the written statement, the defendant-bank has contended that only on account of the interim order passed by the City Civil Court, Madras, in O.S. No. 3266 of 1978, the bank could not extend the bank guarantee at the request of the defendant-Corporation and in view of the proceedings pending, the defendant cannot be called upon to pay the amount due under the guarantee. Further, the terms of the guarantee do not provide for payment of interest; that since the non-payment of the amount due under the guarantee was not due to this failure on the part of the bank, but on account of the order of the court; that the suit is also barred by limitation.

The lower court, based on the above pleadings by parties, framed