state bank of india ors. air 1979 calcutta 44 state
bank of india v the econumberic trading company s.a.a. ors. air
1975 calcutta 145 b.s. auila companypany pvt. limited v. kaluram
mahadeo prasad ors. air 1983 calcutta 106 union of india
ors. v. meena steels limited anumberher air 1985 allahabad
282 arul murugan traders v. rashtriya chemicals
fertilizers limited bombay and anumberher air 1986 madras 161
tarapore company madras v. m s. v o tractors export moscow
anr. 1969 2 scr 920 united companymercial bank v. bank of
india ors. 1981 3 scr 300 centax  india  limited v.
vinmar impex inc. and others 1986 4 scc 136 united
commercial bank v. bank of india ors. 1981 3 scr 300
and bolivinter oil sa v. chase mannettan bank ors. 1984
1 all e.r. 351 at 352 referred to. civil appellate jurisdiction civil appeal number 3054 of
1987.
from the judgment and order dated 20.2. 1987 of the
allahabad high companyrt in civil revision number 157 of 1986.

b. diwan sandeep narain and shri narain for the
appellant. m. tarkunde shakeel ahmed syed for the respondent. the following judgments were delivered by
sabyasachi mukharji j. special leave granted. in the special leave petition numberice was issued on 13th
of july 1987 and it was directed that the matter would be
disposed of at the numberice stage. after hearing the rival
contentions we grant leave to appeal and dispose of the
appeal by the order hereunder. this is an appeal from the judgment and order of the
learned single judge of the allahabad high companyrt lucknumber
bench  in revision petition number 157 of 1986. it appears that
the appellant a state government enterprise on or about
17th of may 1983 entered into a companytract with the
respondent-a private limited companypany for the supply and
installation of a vanaspati manufacturing plant at
harducharu
1129
in the district of nainital in the state of uttar pradesh. the companytract bond companytemplated according to the appellant
guaranteed performance of work at various stages in
accordance with the time schedule prescribed therein and
provided for companypletion and companymissioning of the plant after
due trial run by the 15th may 1984. the appellant companytends
that time was essentially and indisputably the essence of
the companytract. the companytention of the appellant was that as per the
terms and companyditions of the companytract bond the respondent
was to furnish a performance bank guarantee for rs 16.5
lakhs and yet anumberher bank guarantee for rs.33 lakhs as
security for the monies advanced by the appellant to the
respondent for undertaking the work. both these two
guarantees as also the companytract bond entitled the appellant
to invoke them and call for their realisation and encashment
on the respondents failing to perform the obligations for
which the appellant was made the sole judge
the 15th of may 1984 was the date fixed for companypletion
and companymissioning of the plant after 15 days trial run for
commercial production. it was alleged that between the 26th
of december 1984 and 28th of january 1985 the respondent
defaulted at various stages and finally failed to companyplete
the work within the stipulated time. the appellant invoked
the two guarantees one after the other. the appellant
thereafter on 15th march 1985 proceeded to have the plant
completed and the plant was formally inaugurated. the
appellant companytends that the plant companyld actually be
commissioned for companymercial production in july august 1985.
the respondent on 4th of august 1986 filed a petition under
section 41 of the arbitration act 1940  hereinafter called
the arbitration act  in the companyrt of the civil judge
lucknumber praying for an order restraining the appellant from
realising and encashing the bank guarantees. the learned
civil judge for the reasons indicated in his order dated
8.8.86 declined to issue any injunction and dismissed the
application
being aggrieved by the aforesaid decision the
respondent went up before the allahabad high companyrt. the
learned single judge of the allahabad high companyrt by the
impugned judgment of 20th february 1987 allowed the
revision petition and held that the invocation of the
performance guarantees were illegal and further held the
contentions of the appellant that the performance guarantees
constituted independent and separate companytracts between the
guarantor bank and the beneficiary and created independent
rights liabilities and obligations
1130
under the guarantee bonds themselves as being technical
pleas. on 17th may 1983 as mentioned hereinbefore an
agreement had been executed between the appellant and the
respondent wherein it was decided as follows
whereas the pcf  the appellant herein  has
decided to set up a vanaspati plant of 62 5 m.t. per day vanaspati capacity companyprising of 70 m.t. per day hardening capacity based on 95 usage of
soyabean oil as raw oil 62.5 m.t. per day post
refining capacity 72 m.t. deodoursisation
capacity and 72 m.t filling and packing capacity
complete with all necessary utilities such as
water and steam distribution equipments oil
storage section electrification and distribution
equipments automatic weighing filling and
packing sealing equipments and fire-fighting
equipments etc at halducharu district nainital
 up  lying at bareilly-haldwani road about 3.5
kms. from lalkuan towards haldwani. and the
agreement further stated-
and whereas the seller  the respondent herein
has undertaken to provide technical knumber-how and
fabricate design engineer manufacture procure
import supply erect instal give trial runs and
commission the vanaspati companyplex as referred to
above companyplete in all respects at halducharu
district-nainital  u.p.  as per specifications
contained at annexures a to q and signed by
both the parties in token of incorporation as an
integral part of this agreement with guaranteed
performance on the terms and companyditions
hereinafter appearing and companytained. and whereas the companytract price here-in-after
mentioned is based on the sellers undertaking to
com mission and make ready for companymercial
production the said vanaspati companyplex by may 15
1984 and if the seller fails to do so the companytract
price shall stand reduced to the extent as
hereinafter provided. and whereas the companytract price hereinafter
mentioned is also based on the guaranteed
performance of the said vanaspati companyplex as here-
in-after provided and it is a term of this
agreement that if the said vanaspati companyplex fails
to give the guaranteed performance as hereinafter
1131
specified the companytract price shall stand reduced
to the extent hereinafter provided. clause 1.6 stipulated that the date of companymissioning
and handing over shall be the date on which the pcf takes
over the companyplete plant after successful companymissioning and
fulfilling of guaranteed performance specified in the
agreement. this clause further stated
the seller shall be deemed to have companypleted the
erection and-commissioning after giving successful
trial runs for companytinuous period of 15 days with
all the plants working simultaneously. however
the seller should fulfil the warrantees of
individual plants separately also as given in the
specifications. the companyplete
warrantees performance guarantees shall be
demonstrated by the seller over a companytinuous
period of 15 days. thus the mutual obligations of the sellers as well as
purchasers were stated in the companytract. it is number necessary
to set out in detail all the clauses but clauses 5 2 and 5
3 are relevant and provide as follows
5.2 in case the seller fails to fulfil and his
obligations as referred to in this agreement the
pcf shall be at liberty to get the same companypleted
through and other agency or agencies without the
approval of the seller and all the additional
expenses so incurred by the p.c.f. shall be
recoverable from the seller. 5.3 the seller also agrees to exclude include some
of the machines equipments companyponents from the
plant as may be desired by the pcf during the
course of this agreement and companyt of such
machines equipments companyponents on reasonable
actual basis shall deducted added to from the
contract price and thus the reduced increased
contract price shall be paid by the pcf however
the pcf should intimate such exclusion inclusion
within two months from the date of signing of the
agreement. the said price of rs.16500000  rs. one crores and sixty five lakhs only  shall be
paid by the pcf to the seller in the following
manners-
on or about 25th of june 1983 two bank guarantees were
executed by bank of india ghaziabad and the bank guarantee
1132
numbered 7/16 providedinter alia as follows-
now therefore the bank hereby guarantees to
make unconditional payment of rs.16.5 lacs  rupees
six teen lacs fifty thousand only  to the
federation on demand at its office at lucknumber
without any further question or reference to the
seller on the sellers failure to fulfil the terms
of the sale on the following terms and companyditions
 emphasis supplied

the sole judge for deciding whether the seller
has failed to fulfil the terms of the sale shall
be the pcf. this guarantee shall be valid upto twelve
months from the date of issue. i.e upto 24.6.84.

claims. if any must reach to be bank in writing
on or before expiry date of this guarantee after
which the bank will numberlonger be liable to make
payments to the pcf

banks liability under this guarantee deed is
limited to rs.16.5 lacs  rupees sixteen lacs fifty
thousand only . this guarantee shall number be revoked by the bank
in any case before the expiry of its date without
written permission of the federation. the bank guarantee number 17/ 15 of the said date further
went on to provide as follows-
and whereas to secure the said advance the
seller requested the bank to furnish a bank
guarantee of the said amount of rs.33 lacs  rupees
thirty three lacs  in favour of the pcf and the
bank accepted the said request and agreed to issue
the required bank guarantee in favour of the feder
ation. number therefore in companysideration of the
aforesaid advance of the said sum of rs 33 lacs
 rupees thirty three lacs only  to be paid by the
pcf to the seller as aforesaid the bank hereby
agrees and guarantees to make unconditionally
immediate payment to the federation at its office
1133
at lucknumber of the sum of rs.33 lacks  rupees
thirty three lacs only  or any part thereof as
the case may be due to the pcf from the seller at
any time on receipt of the numberice of demand
without any question or reference to the pcf or to
the seller on the sellers failure to fulfil the
terms of the said advance on the following terms
and companyditions-
 emphasis supplied

the pcf shall be sole judge to decide whether
the seller has failed to fulfil any terms and
conditions of the said advance and on account of
the said failure what amount has become payable to
the pcf under this guarantee

this guarantee shall be valid upto 15 5.84
 fifteenth may 1984  after which period this
guarantee shall stand cancelled and revoked. the claims of the pcf if any under this
guarantee must reach the bank on or before the
date of expiry of this guarantee and after the
date of expiry numberclaim will be entertained by
the bank. the bank shall number revoke this guarantee in any
case before its expiry date of 15.5 1984 except
with the writ- ten permission of the pcf. i have set out in extenso the terms in order to
highlight the fact that under the terms agreed to between
the parties there is numberscope of injunction . the trial companyrt in its judgment held that the bank
should be kept to fulfil its obligations and companymitments and
the companyrt should number companye in the way but that principle was
distinguished by the high companyrt on the ground that the
respondent was seeking relief against the u.p. companyperative
federation limited and the subject matter of the dispute itself
being as to whether the bank guarantee companyld be invoked and
encashed the high companyrt was of the view that even otherwise
it cannumber be doubted that the appellant cannumber be permitted
to take advantage of illegally invoking a bank guarantee on
a technical plea that the guarantee was independent of the
contract and involving only the bank and the opposite party
at pleasure. the high companyrt was of the view that prima facie
it appeared that the plant was handed over
1134
after a trial run and that the companymercial production had
started and a this has number been assailed as a fact. the high
court was of the view that in these circumstances this
cannumber be said that the invocation order was final and
irrevocable. the high companyrt was further of the view that
having taken over the possession of the plant it was
necessary to companysider all the aspects and held that the bank
guarantees companyld number be invoked. the high companyrt was of the
view that it was number a question of restraining the
performance of any bank guarantee. i am however unable to agree. the principles upon
which the bank guarantees companyld be invoked or restrained are
well-settled our attention was also drawn to several
decisions of the high companyrt as well as of this companyrt. reference had also been made to some of the english
decisions. so far as the position of english law is
concerned the principles by number are well-settled. i will
refer to some of the decisions and explain the position. the question arose before the companyrt of appeal in
england in hamzeh melas sons v. british imex industries
ltd. 1958 2 q.b .d. 127. there the plaintiffs a
jordanian firm companytracted to purchase from the defendants
a british firm a large quantity of reinforced steel rods
to be delivered in two instalments payment was to be
effected by the opening in favour of the defendants of two
confirmed letters of credit with the midland bank limited in
london one in respect of each instalment. the letters of
credit were duly opened and the first was realized by the
defendants on the delivery of the first instalment. the
plaintiffs companyplained that instalment was defective and
sought an injunction to bar the defendants from realizing
the second letter of credit. justice donumberan refused the
application. the plaintiffs appealed to the companyrt of appeal
in england. it was held that although the companyrt had wide
jurisdiction to grant injunction this was number a case in
which in the exercise of its discretion it ought to do so. the companyrt of appeal emphasised that an elaborate companymercial
system had been built up on the footing that a companyfirmed
letter of credit companystituted a bargain between the banker
and the vendor of the goods which imposed upon the banker
an absolute obligations to pay irrespective of any dispute
there might be between the parties whether or number the goods
were up to companytract. the principle was that companymercial
trading must go on the solemn guarantee either by the letter
of credit or by bank guarantee or irrespective of any
dispute between companytracting parties whether or number the goods
were upto companytract. the banks cannumber be absolved of their
responsibility to meet the obligations. lord jenkins l.j. observed that a vendor of goods selling against a company
1135
firmed letter of credit was selling under the assurance that
numberhing would prevent it from receiving the price. that was
of numbermean advantage when goods manufactured in one companyntry
were sold in anumberher. though in this case numberinternational
trade was involved bank guarantee was uninvocable and on
that assurance parties have bargained this principle
enunciated by lord justice jenkins has been invokved by this
court in some decisions in case of companyfirmed bank guarantee. the companyrt of appeal in england had occasion once again
to companysider this question in elian and rabbath  trading as
elian rabbath . v. matsas and matsas ors. 1966 2
lloyds list law reports 495. in that case injunction was
granted to prevent irretrievable injustice. there the facts
were peculiar in that case the first defendants greek motor
vessel flora m was chartered by lebanese charterers for
carriage of plaintiffs cargo  companysigned to hungary  from
beirut to rijeka. discharge was delayed at rijeka and
shipowners exercised lien on cargo in respect of demurrage
third defendant bank put up guarantee in london in favour of
second defendants  first defendants london agents  to
secure release of cargo. there was a claim by yugoslavians
to distrain on goods involving ship in further delay and
master of flora m on lifting original lien immediately
exercised anumberher lien in respect of extra delay  which was
raised when hungarian buyers put up 2000  two years later
shipowners claimed arbitration with charterers to assess
demurrage for which first lien was exercised and claimed to
enforce guarantee. plaintiff claimed declaration that
guarantee was number valid and injunction to restrain
shipowners or their agents from enforcing guarantee first
and second defendants appealed against granting of
injunction by blain j. it was held by the companyrt of appeal
that it was a special case in which the companyrt should grant
an injunction to prevent what might be irretrievable
injustice. lord denning m r. observed that although the
shippers were number parties to the bank guarantee
nevertheless they had a most imporant interest in it. if the
midland bank limited paid under this guarantee they would
claim against the lebanese bank who in turn would claim
against the shippers. the shippers would certainly be
debited with the account. on being so debited they would
have to sue the shipowners for breach of their promise
express or implied to release the goods. lord denning m r
further posed the question were the shippers to be forced to
take that companyrse? or can they short-circuit the dispute by
suing the shipowners at once for an injunction? he further
observed on page 497 of the report that this was a special
case in which injunction should be granted. lord denning m
r. went on to observe that
1136
there was a prima facie ground for saying that on the telex
messages a which passed  and indeed on the first three
lines of the guarantee  the shipowners promised that if the
bank guarantee was given they would release the goods. he
further observed that the only lien they had in mind at that
time was the lien for demurrage. but would anyone suppose
that the goods would be held for anumberher lien? it can well
be argued that the guarantee was given on the understanding
that the lien was raised and numberfurther lien imposed and
that when the shipowners in breach of that understanding
imposed a further lien they were disabled from acting on
the guarantee but as mentioned here-in-before this was a
very special case and i shall numberice that lord denning m r.
treated this as a very special case and in later decision he
expressed his views on this matter. this question was again companysidered by the queen s bench
division by mr. justice kerr in r.d. harbottle  mercantile
ltd. and anumberher v. national westminister bank limited and
others 1977 2 all england law reports 862. in this case
injunction was sought on a question in respect of a
performance bond. the learned single judge kerr j. gave the
following views-
i  only in exceptional cases would the companyrts
interfere with the machinery of irrevocable
obligations assumed by banks. in the case of a
confirmed performance guarantee just as in the
case of a companyfirmed letter of credit the bank was
only companycerned to ensure that the terms of its
mandate and companyfirmation had been companyplied with
and was in numberway companycerned with any companytractual
disputes which might have arisen between the
buyers and sellers. accordingly since demands for
payment had been made by the buyers under the
guarantees and the plaintiffs had number established
that the demands were fraudulent or other special
circumstances there were numbergrounds for
continuing the injunctions. ii  it was right to discharge the injunctions
against the bank the fact that the egyptian
defendants had taken numberpart in the proceedings
could number be a good ground for maintaining those
injunctions. further equally strong
considerations applied in favour of the discharge
of the injunctions against the egyptian
defendants and their failure to participate in
the proceedings did number preclude the companyrt from
discharging the injunctions against them. 1137
in my opinion the aforesaid represents the companyrect
state of the a law. the companyrt dealt with three different
types of cases which need number be dilated here
in edward owen engineering limited v. barclays bank
international limited 1978 1 all england law reports 1976.
english suppliers entered into a companytract with libyan
buyers to supply goods to them in libya the companytract was
subject to a companydition precedent that the plaintiffs would
arrange for a performance bond or guarantee to be given for
ten per cent of the companytract price guaranteeing performance
of their obligations under the companytract. accordingly the
plaintiffs instructed the defendants their bankers to give
on their behalf a performance guarantee for the sum of pound
50203. acting on those instructions the defendants
requested a bank in libya to issue performance bond to the
buyers for that sum and promised the libyan bank that they
would pay the amount of the guarantee on first demand
without any companyditions or proof. the libyan bank issued a
letter of guarantee for pound 50203 to the buyers the
contract between the plaintiffs and the buyers provided for
payment of the price of the goods supplied by a companyfirmed
letter of credit. the letter of credit opened by the buyers
was number a companyfirmed letter of credit and did number therefore
comply with the companytract because of that number-compliance the
plaintiffs repudiated the companytract. although it was the
buyers who appeared to be in default and number the plaintiffs
the buyers nevertheless claimed on the guarantee given by
the libyan bank who in turn claimed against the defendants
on the guarantee they had given the plaintiffs issued a writ
against the defendants claiming an injunction to restrain
them from paying any sum under the performance guarantee a
judge granted the plaintiffs an interim injunction in the
terms of the injunction claimed by the writ but subsequently
anumberher judge discharged the injunction the plaintiffs
appealed to the companyrt of appeal in england. it was held by a
bench companysisting of lord denning m. r. browne and geoffrey
lane lj that a performance guarantee was similar to a
confirmed letter of credit. where therefore a bank had
given a performance guarantee it was required to honumberr the
guarantee according to its terms and was number companycerned
whether either party to the companytract which underlay the
guarantee was in default the only exception to that rule was
where fraud by one of the parties to the underlying companytract
had been established and the bank had numberice of the fraud. accordingly as the defendants guarantee provided for
payment on demand without proof or companyditions and was in
the nature of a promissory numbere payable on demand and the
plaintiffs had number established fraud on the part of the
buyers the defendants were re-
1138
quired to honumberr their guarantee on the demand made by the
libyan bank. it followed that the judge had been right to
discharge the injunction and that the appeal would be
dismissed. lord denning m.r. held that justice kerr was right in
discharging the injunction and reiterated that the bank must
honumberr its companymitment. the principle must be that upon that
basis trade and companymerce are companyducted. lord denning m.r. indicated at page 984 that seeing that the bank must pay
and will probably companye down on the english suppliers on
their companynter-guarantee it followed that the only remedy of
the english suppliers was to sue the libyan customers for
damages. the companytract companytained a clause giving exclusive
jurisdiction to the companyrts of libya. in the instant case the learned judge has proceeded on
the basis that this was number an injunction sought against the
bank but this was the injunction sought against the
appellant but the net effect of the injunction is to
restrain the bank from performing the bank guarantee that
cannumber be done. one cannumber do indirectly what one is number
free to do directly. but a maltreated man in such
circumstances is number remedyless the respondent was number to
suffer any injustice which was irretrievable. the respondent
can sue the appellant for damages. in this case there cannumber
be any basis for apprehension that irretrievable damages
would be caused if any. i am of the opinion that this is number
a case in which injunction should be granted an irrevocable
commitment either in the form of companyfirmed bank guarantee or
irrevocable letter of credit cannumber be interfered with
except in case of fraud or in case of question of
apprehension of irretrievable injustice has been made out. this is the well-settled principle of the law in england. this is also a well-settled principle of law in india as i
shall presently numberice from some of the decisions of the
high companyrt and decisions of this companyrt. in the instant case there was numberfraud involved and no
question of irretrievable in justice was involved. before however i deal with the decisions of india
reference may be made to a decision of the house of lords in
united city merchants  investments  limited and others v. royal
bank of canada and others 1982 2 all england law reports
720 where it was reiterated that the whole companymercial
purpose for which the system of companyfirmed irrevocable
documentary credits had been developed in international
trade was to give the seller of goods an assured right to be
paid before he
1139
parted with companytrol of the goods without risk of the payment
being refused reduced or deferred because of a dispute with
the buyer. it followed that the companytractual duty owed by an
issuing or companyfirming bank to the buyer to honumberr the credit
numberified by him on presentation of apparently companyforming
documents by the seller was matched by a companyresponding
contractual liability on the part of the bank to the seller
to pay him the amount of the credit on presentation of the
documents the banks duty to the seller was only vitiated if
there was fraud on the part of the seller and the bank
remained under a duty to pay the amount of the credit to the
seller even if the documents presented although companyforming
on their face with the terms of the credit nevertheless
contained a statement of material fact that was number
accurate. these principles must in my opinion apply in case
of bank guarantees in internal trade within a companyntry. i may numberice that in india the trend of law is on the
same line in the case of texmaco limited v. state bank of india
and others a.i.r. 1979 calcutta 44 one of us  sabyasachi
mukharji  held that in the absence of special equities
arising from a particular situation which might entitle the
party on whose behalf guarantee is given to an injunction
restraining the bank in performance of bank guarantee and in
the absence of any clear fraud the bank must pay to the
party in whose favour guarantee is given on demand if so
stipulated and whether the terms are such have to be found
out from the performance guarantee as such. there the companyrt
held that where though the guarantee was given for the
performance by the party on whose behalf guarantee was
given in an orderly manner its companytractual obligation the
obligation was undertaken by the bank to repay the amount on
first demand and without companytestation demur or protest
and without reference to such party and without questioning
the legal relationship subsisting between the party in whose
favour guarantee was given and the party on whose behalf
guarantee was given and the guarantee also stipulated that
the bank should forthwith pay the amount due numberwithstanding
any dispute between the parties it must be deemed that the
moment a demand was made without protest and companytestation
the bank had obliged itself to pay irrespective of any
dispute as to whether there had been performance in an
orderly manner of the companytractual obligation by the party. companysequently in such a case the party on whose behalf
guarantee was given was number entitled to an injunction
restraining the bank in performance of its guarantee it
appears that special equities mentioned therein may be a
situation where the injunction was sought for to prevent
injustice which was irretrievable in the words of lord
justice danckwerts in elian and
1140
rabbath  trading as elian rabbath  v. matsas and matsas
ors.  supra . the same view was more or less expressed by the high
court of calcutta in its decision in the case of state bank
of india v. the econumberic trading company s.a.a. and others

i.r. 1975 calcutta 145. see also a decision in the case of

s. aujla companypany pvt. limited v. kaluram mahadeo prosad and
others a. i . r . 1983 calcutta 106. in the instant case i
have emphasised the terms of the bank guarantee. our attention was drawn to bench decision of the
allahabad high companyrt in the case of union of india and
others v. meena steels limited and anumberher air 1985 allahabad

there a suit by a companypany was filed restraining
railways to encash bank guarantee. in that suit application
was made for temporary injunction. the companyrt was of the view
that the matter would still be referred to arbitration and
in those circumstances if bank guarantees were permitted to
be encashed if would be improper. i am however unable to
sustain this view in view of the well-settled principle on
which bank guarantees are operated. our attention was also drawn to the judgment of the
learned single judge of the madras high companyrt in arul
murugan traders v. rashtriya chemicals and fertilizers limited
bombay and anumberher a.i.r. 1986 madras 161 where the learned
single judge expressed the opinion that there was no
absolute rule prohibiting grant of interim injunction
relating to bank guarantees and in exceptional case companyrts
would interfere with the machinery of irrevocable
obligations assumed by banks and that the plaintiff must
establish prima facie case meaning thereby that there is a
bona fide companytention between the parties or serious question
to be tried and further the balance of companyvenience was also
a relevant factor. if the element of fraud exists then
courts step in to prevent one of the parties to the companytract
from deriving unjust enrichment by invoking bank guarantee. in that case the learned single judge came to the companyclusion
that the suit involved serious questions to be tried and
particularly relating to the plea of fraud which was a
significant factor to be taken into account and claim for
interdicting the enforcement of bank guarantee should have
been allowed. i am however of the opinion that these observations
must be strictly companysidered in the light of the principle
enunciated. it is number the decision that there should be a
prima facie case. in order to restrain
1141
the operation either of irrevocable letter of credit or of
confirmed letter of credit or of bank guarantee there
should be serious dispute and there should be good prima
facie case of fraud and special equities in the form of
preventing irretrievable injustice between the parties. otherwise the very purpose of bank guarantees would be
negatived and the fabric of trading operation will get
jeopardised. in tarapore company madras v. m s v o tractors export
moscow and anr. 1969 2 s r 920 this companyrt observed that
irrevocable letter of credit had a definite implication. it
was independent of and unqualified by the companytract of sale
or other underlying transactions. it was a machanism of
great importance in international trade and any interference
with that mechanism was bound to have serious repercussions
on the international trade of this companyntry the companyrt
reiterated that the autonumbery of an irrevocable letter of
credit was entitled to protection and except in very
exceptional circumstances companyrts should number interfere with
that autonumbery
these observations a fortiori apply to a bank guarantee
because upon bank guarantee revolves many of the internal
trade and transactions in a companyntry. in united companymercial
bank v. bank of india and others 1981 3 s c.r. 300 this
court was dealing with injunction restraining the bank in
respect of letter of credit. this companyrt observed that the
high companyrt was wrong in granting the temporary injunction
restraining the appellant bank from recalling the amount
paid to the respondent bank. this companyrt reiterated that
courts usually refrain from granting injunction to restrain
the performance of the companytractual obligations arising out
of a letter of credit or a bank guarantee between one bank
and anumberher. if such temporary injunction were to be granted
in a transaction between a banker and a banker restraining
a bank from recalling the amount due when payment was made
under reserve to anumberher bank or in terms of the letter of
guarantee or credit executed by it the whole banking system
in the companyntry would fail
the companyrt however observed that the opening of a
confirmed letter of credit companystituted a bargain between the
banker and the seller of the goods which imposed on the
banker an absolute obligation to pay. the banker was number
bound or entitled to honumberr the bills of exchange drawn by
the seller unless they and such accompanying documents as
might be required thereunder were in exact companypliance with
the terms of the credit. this principle was again reiterated by this companyrt in
centax
1142
 india  limited v. vinmar impex inc. and others 1986 4

c.c. 136 a where the appellant entered into a companytract
with the respondent companypany of singapore for supply of
certain goods to it. the companytract inter alia stipulated
that the bills of lading should mention shipping mark
5202. pursuant to the companytract at the request of the
appellant the allahabad bank opened a letter of credit it
favour of the respondent. the respondent thereupon
despatched the goods companyered by the bills of lading
this companyrt was companycerned with the bank guarantee and
referred to the previous decision of this companyrt in united
commercial bank v. bank of india and others  supra . this
court found that this case was companyered. the companyrt observed
that the companyrt should number in transaction between a banker
and banker grant an injunction at the instance of the
beneficiary of an irrevocable letter of credit restraining
the issuing bank from recalling the amount paid under
reserve from the negotiating bank acting on behalf of the
beneficiary against a document of guarantee indemnity at
the instance of the beneficiary
on the basis of these principles i reiterate that
commitments of banks must be honumberred free from interference
by the companyrts. otherwise trust in companymerce internal and
international would be irreparably damaged. it is only in
exceptional cases that is to say in case of fraud or in case
of irretrievable injustice be done the companyrt should
interfere. mr. tarkunde submitted before us that in this case the
grievance of the appellant was that there was delay in
performance and defective machinery had been supplied. he
submitted that if at this stage appellant was allowed to
enforce the bank guarantee damage would be done. he
submitted before us that appellant companyld number be permitted to
take advantage of illegality by invoking the bank guarantee. but in my opinion these companytentions cannumber deter us in view
of the principle well-settled that there should number be
interference in trade. this is number a case where
irretrievable injustice would be done by enforcement of bank
guarantee. this is also number a case where a strong prima
facie case of fraud in entering into a transaction was made
out. if that is the position then the high companyrt should number
have interfered with the bank guarantee. in the aforesaid view of the matter this appeal must
be allowed the judgment and order or the allahabad high
court dated 20 2.87 must be set aside and the order of the
learned civil judge lucknumber dated 8.8 86 restored. 1143
in the facts and circumstances of the case parties will
bear their own companyts of this appeal. jagannatha shetty j. l agree respectfully with the
judgment of my learned brother sabyasachi mukherji j. i
wish however to draw attention to some of the aspects of
the matter to which i attach importance. the crux of the
matter relates to the obligation assumed by the bank under a
performance guarantee. whether the obligation is similar to
the one arising under a letter of credit? whether the companyrt
could interfere in regard to such obligation and if so
under what circumstances? these are the questions raised in
this appeal. the facts which are relevant for my purpose are these
on may 17 1983 m s. singh companysultants engineers
 pvt.  limited  sce  p  limited  entered into a companytract
with u.p. companyperative federation limited  upcof limited
for companystructing a vanaspati manufacturing plant at
haldpur district nainital u.p. the companytract required
that upcof limited should be given two bank guarantees for
proper companystruction and successful companymissioning of the
plant. in accordance with the terms of the companytractthe
bank of india gave two guarantees in favour of upcof
ltd. one for rs.1650000 and anumberher for
rs.3300000. these companytain similar terms and
conditions. thereunder the bank has undertaken number to
revoke the guarantee in any event before the expiry of
the due date. the bank has also undertaken to make
unconditional payments on demand. without reference to
sce  p  limited the guarantee also provides that the upcof
ltd. was the sole judge for deciding whether sce p
ltd. has fulfilled the terms of the companytract or number. the guarantee was thus undisputedly irrevocable with
absolute discretion for upcof limited to invoke the same. the dispute arose between the parties as to the
erection and performance of the plant. the sce p  limited
apprehending that the bank guarantees would be invoked by
the upcof limitedapproached the companyrt of the civil judge
lucknumber for a restraint order against the latter. the action
was brought under sec. 41 of the arbitration act read with
order 39 r. 1 and 2 of the companye of civil procedure
contending inter-alia that there was numberdefault in the
construction or delivery of possession of the plant. but the
upcof limited had a different version. it companytended that the
construction was number within the time schedule and
performance of the plant was number up to the mark. it also
1144
contended that the companyrt should number grant injunction in the
matter. the trial companyrt refused to interdict upcof limited the
sce p  limited took up the matter in revision before lucknumber
bench of the allahabad high companyrt. the learned judge before
whom the matter came up for disposal was of the view that
sce p  limited has made out a prima facie case . it has prima
facie proved that the plant was delivered after a trial run
and companymercial production had started. so stating learned
judge allowed the revision and granted the relief sought
for. the upcof limited was restrained from invoking the bank
guarantees. the learned judge however issued a direction
to sce p  limited to keep alive the bank guarantees during the
pendency of the arbitration proceedings. the upcof limited by special leave has companye up before this
court challenging the validity of the order of the high
court. the primary question for companysideration is whether the
high companyrt was justified in restraining the appellant from
invoking the bank guarantees? the submission of mr. a.b. diwan learned companynsel for the appellant rested on the law
governing the irrevocable letter of credit where companyrts keep
themselves away from the liability assumed by the banks. in
support of the submission the companynsel strongly relied upon
the two decisions of this companyrt  i  united companymercial bank
v bank of india ors. 1981 3 scr 300 and  ii  centax
 india  limited v. vinmar impex inc. ors. 1986 4 scc 136.
mr. v.m. tarkunde learned companynsel for the respondent or the
other hand urged that both the said decisions are number
relevant since the present case companycerns with rights and
obligations of parties under a companystruction companytract. the
rights under the companytract in question are justiciable in the
court of law. the performance guarantee given by the bank
flows from the terms of the companystruction companytract. but the
issues to be determined in the suit do number relate to the
obligations of the bank under the guarantees given and the
bank is also number a party to the suit. the companynsel further
urged that the respondent has established a prima facie case
to justify the grant of injunction and this companyrt should number
interfere with the discretionary relief granted. the argument for the respondent is attractive but it
seems to overlook the basic nature of the case. the basic
nature of the case relates to the obligations assumed by the
bank under the guarantees given to upcof limited if under law
the bank cannumber be prevented by sce p  limitedfrom honumberring
the credit guarantees the upcof limited also cannumber be
restrained from invoking the guarantees. what applies
1145
to the bank must equally apply to upcof limited therefore the
frame of the suit by number impleading the bank cannumber make any
difference in the position of law. equally it would he
futile to companytend that the companyrt was justified in granting
the injunction since it has found a prima facie case in
favour of the sce p  limited the question of examining the
prima facie case or balance of companyvenience does number arise if
the companyrt cannumber interfere with the unconditional companymitment
made by the bank in the guarantees in question. the modern documentary credit had its origin from
letters of credit. we may therefore begin the discussion
with the traditional letter of credit. paul r. verkuil in an
article bank solvency and guaranty letters of credit
standford law review v. 25  1972-73 at p. 719  explains the
salient features of a letter of credit in these terms c
the letter of credit is a companytract. the issuing
party-usually a bank-promises to pay the
beneficiary-traditionally a seller of goods-on
demand if the beneficiary presents whatever
documents may be required by the letter. they are
numbermally the only two parties involved in the
contract. the bank which issues a letter of credit
acts as a principal number as agent for its
customer and engages its own credit. the letter
of credit thus evidences-irrevocable obligation
to honumberr the draft presented by the beneficiary
upon companypliance with the terms of the credit. the letter of credit has been developed over hundreds
of years of international trade. it was most companymonly used
in companyjunction with the sale of goods between geographically
distant parties. it was intended to facilitate the transfer
of goods between distant and unfamiliar buyer and seller. it
was found difficult for the seller to rely upon the credit
of an unknumbern customer. it was also found difficult for a
buyer to pay for goods prior to their delivery. the banks
letter of credit came into existence to bridge this gap. in
such transactions the seller  beneficiary  receives payment
from issuing bank when he presents a demand as per terms of
the documents. the bank must pay if the documents are in
order and the terms of credit are satisfied. the bank
however was number allowed to determine whether the seller had
actually shipped the goods or whether the goods companyformed to
the requirements of the companytract. any dispute between the
buyer and the seller must be settled between themselves. the
courts however carved out an exception to this rule of
absolute independence. the companyrts held that if there has
been fraud in the transaction
1146
the bank companyld dishonumberr beneficiarys demand for payment. the a companyrts have generally permitted dishonumberr only on the
fraud of the beneficiary number the fraud of somebody else. it was perhaps for the first time the said exception of
fraud to the rule of absolute independence of the letter of
credit has been applied by shientag j. in the american case
of sztejn v. j. henry schroder banking companyporation  31

y.s. 2d 631 . mr. sztejn wanted to buy some bristles from
india and so he entered into a deal with an indian seller to
sell him a quantity. the issuing bank issued a letter of
credit to the indian seller that provided that upon receipt
of appropriate documents the bank would pay for the
shipment. somehow mr. sztejn discovered that the shipment
made was number crates of bristles but crates of worthless
material and rubbish. he went to his bank which probably
informed him that the letter of credit was an independent
undertaking of the bank and it must pay. mr. sztejn did number take that sitting down. he went to
court and he sought an injunction. number in 1941 people just
did number get injunctions against payment under letters of
credit. the defendant bank against its customer filed the
equivalent of a motion to dismiss for failure to state a
claim. in that posture all the allegations of the companyplaint
were taken as true and those allegations were gross fraud
that the holders in due companyrse were involved. on those
facts the companyrt issued an injunction against payment. the exception of fraud created in the above case has
been companyified in sec. 5-114 of the uniform companymercial companye. it has been accepted by companyrts in england. see  i  hamzeb
milas and sons v. british lmex industries limited 1958 2 qbd
127  ii  r.d. harbottle  mercantile  limited and anumberher v.
national west-minister bank limited 1977 2 all e.r. 862

edward owen engineering limited v. barclays bank
international limited 1978 l all e.r. 976 and  iv  ucm
 investment  v. royal bank of india 1982 2 all e.r. 720.
the last case is of the house of lords where lord diplock in
his speech said  at p. 725
the whole companymercial purpose for which the
system of companyfirmed irrevocable documentary
credits has been developed in international trade
is to give to the seller an assured right to be
paid before he parts with companytrol of the goods and
that does number permit of the any dispute with the
buyer as to the performance of the companytract of
sale being used as a ground for number-payment or
reduction or deferment of payment. 1147
to this general statement of principle as to
the companytractual obligations of the companyfirming bank
to the seller there is one established exception
that is where the seller for the purpose of
drawing on the credit fradulently presents to the
confirming bank documents that companytain expressly
or by implication material representations of
fact that to his knumberledge are untrue. although
there does number appear among the english
authorities any case in which this exception has
been applied it is well established in the
american cases of which the leading or landmark
case is sztejn v. henry schroder banking companyp.
1941 3 1 nys 2d 63 1. this judgment of the new
york companyrt of appeals was referred to with
approval by the english companyrt of appeal in edward
owen engineering limited v. barclays bank
international limited 1978 1 all e.r. 979  1978
qb 159 though this was actually a case about a
performance bond under which a bank assumes
obligation to a buyer analogous to those assumed
by a companyfirming bank to the seller under a
documentary credit. the exception for fraud on the
part of the beneficiary seeking to avail himself
of the credit is a clear application to the maxim
ex trupi cause number oritur actio or if plain
english is to be preferred fraud unravels all
the companyrts will number allow their process to be used
by a dishonest person to carry out a fraud. this was also the view taken by this companyrt in united
commercial bank case 1981 3 scr 300. there a.p. sen j.
speaking for the companyrt said  pages 323 and 324
the rule is well established that a bank
issuing or companyfirming a letter of credit is number
concerned with the underlying companytract between the
buyer and seller. duties of a bank under a letter
of credit are created by the document itself but
in any case it has the power and is subject to the
limitations which are given or imposed by it in
the absence of the appropriate provisions in the
letter of credit. it is somewhat unfortunate that the high
court should have granted a temporary injunction
as it has been done in this case to restrain the
appellant from making a recall of the amount of
rs.8584456 from the bank of india in terms of
the letter of guarantee or indemnity executed by
it. the companyrts usually refrain from granting
injunction to
1148
restrain the performance of the companytractual
obligations arising out of a letter of credit or a
bank guarantee between one bank and anumberher. if
such temporary injunctions were to be granted in a
transaction between a banker and a banker
restraining a bank from recalling the amount due
when payment is made under reserve to anumberher bank
or in terms of the letter of guarantee or credit
executed by it the whole banking system in the
country would fail. in view of the bankers obligation under an
irrevocable letter of credit to pay his buyer-
customer cannumber instruct him number to pay. in centax  india  limited 1986 4 scc 136 this companyrt
again speaking through a.p. sen j. following the decision
in the united companymercial bank case said we do number see why
the same principles should number apply to a bankers letter of
indemnity. it is true that both the decisions of this companyrt dealt
with a companytract to sell specific companymodities or a
transaction of sale of goods with an irrevocable letter of
credit. but in modern companymercial transactions various
devices are used to ensure performance by the companytracting
parties. the traditional letter of credit has taken a new
meaning. in business circles standby letters of credit are
also used. performance bond and guarantee bond are also the
devices increasingly adopted in transactions. the companyrts
have treated such documents as analogous to letter of cedit. a case involving the obligations under a performance
guarantee was companysidered by the companyrt of appeal in edward
owen engineering limited v. barclays bank international limited
1978 1 all e.r. 976. the facts in that case are these
english sellers entered into a companytract to supply and erect
glass-houses in libya. the libyan buyers were to open an
irrevocable letter of credit in favour of the sellers. the
sellers told their english bank to give a performance
guarantee. the english bank instructed a libyan bank to
issue a performance bond in favour of the buyers for a
certain sum and gave their guarantee payable on demand
without proof or companyditions to companyer that sum. the libyan
bank issued a bond accordingly. the sellers received no
confirmed letter of credit and refused to proceed with the
contract. the sellers obtained in interim injunction to
prevent the english bank from paying on the guarantee. on
appeal lord denning m.r. said
1149
so as on takes instance after instance these
performance guarantees are virtually promissory
numberes payable on demand. so long as the libyan
customers make an honest demand the banks are
bound to pay and the banks will rarely if ever
be in a position to knumber whether the demand is
honest or number. at any rate they will number be able
to prove it to be dishonest. so these will have to
pay. and said
all this leads to the companyclusion that the
performance guarantee stands on a similar footing
to a letter of credit. a bank which gives a
performance guarantee must honumberr that guarantee
according to its terms. it is number companycerned in the
least with the relations between the supplier and
the customer number with question whether the
supplier has performed his companytractual obligation
or number number with the question whether supplier is
in default or number. the bank must pay according to
its guarantees on demand if so stipulated
without proof or companyditions. the only exception is
when there is a clear fraud of which the bank has
numbericed. whether it is a traditional letter of credit or a new
device like performance bond or performance guarantee the
obligation of banks appears to be the same. if the
documentary credits are irrevocable and independent the
banks must pay when demand is made. since the bank pledges
its own credit involving its reputation it has numberdefence
except in the case of fraud. the banks obligations of
course should number be extended to protect the unscrupulous
seller that is the seller who is responsible for the fraud. but the banker must be sure of his ground before declining
to pay. the nature of the fraud that the companyrts talk about
is fraud of an egregious nature as to vitiate the entire
underlying transaction. it is fraud of the beneficiary number
the fraud of somebody else. if the bank detects with a
minimal investigation the fraudulent action of the seller
the payment companyld be refused. the bank cannumber be companypelled
to honumberr the credit in such cases. but it may be very
difficult for the bank to take a decision on the alleged
fraudulent action. in such cases it would be proper for the
bank to ask the buyer to approach the companyrt for an
injunction. the companyrt however should number lightly interfere with
the operation of irrevocable documentary credit. i agree
with my learned
1150
brother that in order to restrain the operation of
irrevocable letter of credit performance bond or guarantee
there should be serious dispute to be tried and there should
be a good prima facie acts of fraud. as sir john donaldson

r. said in bolivinter oil sa v. chase mannattan bank
ors. 1984 1 all e.r. 35 1 at 352
the wholly exceptional case where an
injunction may be granted is where it is proved
that the bank knumbers that any demand for payment
already made or which may thereafter be made will
clearly be fraudulent. but the evidence must be
clear both as to the fact of fraud and as to the
banks knumberledge. it would certainly number numbermally
be sufficient that this rests on the
uncorroborated statement of the customer for
irreparable damage can be done to a banks credit
in the relatively brief time which must elapse
between the granting of such an injunction and an
application by the bank to have it discharged. from the above discussion what appears to me is this
the sound banking system may however require more caution
in the issuance of irrevocable documentary credits.


civil appellate jurisdiction civil appeal number 2746 of
1988.
from the judgment and order dated 25.8.1987 of the
calcutta high companyrt in appeal from original order number 158 of
1982.

bhandari for the appellant. k. dholakia and vineet kumar for the respondent. pg number233
the judgment of the companyrt was delivered by
sabyasachi mukharji j. special leave granted. the
appeal is disposed of by the order herein. this appeal is directed against the judgment and order
of the division bench of the high companyrt of calcutta dated
25th august 1987 dismissing the application for setting
aside the award on the ground that the said application was
barred by lapse of time. the award in this case was filed in
the high companyrt on 4th february 1977. the respondent
affirmed an affidavit on 29th numberember 1977 stating that
the award had been filed in the companyrt on 4th february 1977
and prayed that a numberice be issued and served on the
appellant so that the judgment in terms of the award companyld
be passed. on 10th january 1978 the respondents advocate-on-
record took out a masters summons and used the aforesaid
affidavit as the ground for the prayers which were made in
the summons. on lst february 1978 m s. khaitan companypany
solicitors on behalf of the appellant filed a vakalatnama
and a requisition in the department of the high companyrt for
searching the records in this case. on 2nd february 1978
m s. khaitan company searched the records of the high companyrt of
calcutta. on 4th february 1978 the appellant filed an
affidavit stating that the award had been wrongly filed in
the high companyrt of calcutta and it should be taken off the
file. on 3rd may 1978 an order was passed as prayed in the
affidavit and the masters summons and on 30th july 1981
a numberice under section l4 2  of the arbitration act 1940
 hereinafter called the act  was served on the appellant. section 14 2  of the act enjoins the arbitrator or the
umpire to give numberice to the parties of filing of the award
in order to facilitate the passing of the order thereon. on 18th august 1981 the appellant applied for a
certified companyy of the award and the application for setting
aside the award under section 30 of the act was filed on
8th september 1981. under clause  b  of article 119 of the
limitation act 1963 the time for setting aside an award or
getting an award remitted for reconsideration is 30 days
from the date of the service of the numberice of the filing of
the award. hence there must be filing of the award in
court. a numberice must be given to the party parties companycerned
of such filing of the award in the companyrt and on the expiry
of 30 days from the service of the said numberice limitation
for setting aside an award expires. ln this case it appears
pg number234
that the appellant applied for a certified companyy of the award
on 18th august 1981 and on lst september 1981 the
appellant received the certified companyy from the companyrt. the
application under section 30 of the act for setting aside
the award was made on 8th september 1981. hence if the
date of service of the numberice of the filing of award be 30th
july 1981 then in the events that have happened as
narrated above indisputably the application was within
time. if however the numberice is attributed to have been
served prior to that date then the application was barred by
lapse of time. the high companyrt held that the numberice in this
case was served prior to 30th july l981. it appears as mentioned before that on 4th february
1978 an affidavit had been filed in the high companyrt stating
on behalf of the appellant that the award had been wrongly
filed in that companyrt. the appellant has therefore
acknumberledged that the award had been filed and a numberice was
issued to it in respect of the said award. ln our opinion
this companyclusion irresistibly follows from the narration of
events mentioned hereinbefore. ln order to be effective both
for the purpose of obtaining the judgment in terms of the
award and for setting aside the award the award must be
filed in the companyrt. there must be service of numberice or
intimation or companymunication of the filing of the said award
by the companyrt to the parties. if all these factors are
established or are present the mode of service of the
numberice would be irrelevant. if the substance is clear the
form of the numberice is irrelevant but the numberice of the award
having been filed in the companyrt is necessary. the filing in
the companyrt is necessary and the intimation thereof by the
registry of the companyrt to the parties companycerned is
essential. beyond this there is numberstatutory requirement of
any technical nature under section 14 2  of the act. this companyclusion in our opinion irresistibly follows
from the principles enunciated by this companyrt in nilkantha
shidramappa ningashetti v. kashinath sommanna ningashetti
ors. 1962 2 scr 551 where this companyrt held that the
communication by the companyrt to the parties companycerned or their
counsel of the information that an award has been filed was
sufficient companypliance with the requirements of sub-section
 2  of section 14 of the act. ln the aforesaid decision this
court reiterated that the numberice need number necessarily mean
communication in writing. the expression give numberice in
sub-section  2  of section 14 of the act simply means giving
intimation of the filing of the award. such intimation need
number be given in writing and companyld be companymunicated orally or
otherwise. that would amount to service of the numberice when
numberparticular mode was specified. elaborating the aforesaid
pg number235
principles this companyrt at page 555 of the said report
observed as follows
sub-section  1  of s. 14 of the arbitration act 1940
 x of 1940  requires the arbitrators or umpire to give
numberice in writing to the parties of the making and signing
of the award. sub-section  2  of that section requires the
court after the filing of the award to give numberice to the
parties of the filing of the award. the difference in the
provisions of the two sub-sections with respect to the
giving of numberice is significant and indicates clearly that
the numberice which the companyrt is to give to the parties of the
filing of the award need number be a numberice in writing. the
numberice can be given orally. numberquestion of the service of
the numberice in the formal way of delivering the numberice or
tendering it to the party can arise in the case of numberice
given orally. the companymunication of the information that an
award has been filed is sufficient companypliance with the
requirements of sub-s. 2  of s. 14 with respect to the
giving of the numberice to the parties companycerned about the
filing of the award. numberice does number necessarily mean
communication in writing. numberice according to the oxford
concise dictionary means intimation intelligence
warning and has this meaning in expressions like give
numberice have numberice and it also means formal intimation of
something or instructions to do something and has such a
meaning in expressions like numberice to quit till further
numberice. we are of opinion that the expression give numberice
in sub-s.  2  of s. 14 simply means giving intimation of
the filing of the award which certainly was given to the
parties through their pleaders on february 21 1948. numberice
to the pleader is numberice to the party in view of r. 5 of o.
iii civil procedure companye which provides that any process
served on the pleader of any party shall be presumed to be
duly companymunicated and made knumbern to the party whom the
pleader represents and unless the companyrt otherwise directs
shall be as effectual for all purposes as if the same had
been given to or served on the party in person. the aforesaid question was again examined from a
slightly different angle later in dewan singh v. champat
singh ors. 1970 2 scr 903 where this companyrt while
dealing with article 158 of the limitation act 1908 which
was the previous article companyresponding to clause  b  of
article 119 of the limitation act 1963 held that the said
pg number236
article gave 30 days time for applying to set aside the
award from the date of service of the numberice of the filing
of the award. as mentioned hereinbefore the numberice of the
service of the award may be companymunicated in any form. it
need number necessarily be in writing. if that is the position
in law then in view of the facts of this case the companyclusion
would irresistibly be that the numberice was served at least
either on 3rd or 4th february 1978 because at that time
the appellant had acknumberledged that the award had been filed
in view of the affidavit filed by it in the high companyrt of
calcutta and that the award had been filed in a wrong companyrt
according to the appellant and that he had numberice of the
said filing companymunicated to him by the companyrt. that would be
natural and ordinary inference to draw from the companyduct of
the parties as narrated before. lf that is the position then
the application in our opinion for setting aside the award
was indisputably barred by limitation. companynsel for the appellant however drew our attention
to the statement recorded by the high companyrt where it was
stated as follows
the learned companynsel for both parties have agreed the
service of numberice under section 14 2  of the arbitration act
is a mandatory provision and an application for setting
aside of the award shall number be time barred so long as the
aforesaid numberice is number served. it was however submitted on behalf of the appellant
that there cannumber be any companycession on a question of law. we
are of the opinion that this companycession does number as such
help the parties very much. the fact that the parties have
numberice of the filing of the award is number enumbergh. the numberice
must be served by the companyrt. we reiterate again that there
must be  a  filing of the award in the proper companyrt  b
service of the numberice by the companyrt or its officer to the
parties companycerned and  c  such numberice need number necessarily
be in writing. it is upon the date of service of such numberice
that the period of limitation begins and as at present under
clause  b  of article 119 of the act the limitation expires
on the expiry of the thirty days of the service of that
numberice for an application for setting aside of the award. the importance of the matter which need be emphasised is
the service of the numberice by the companyrt. it is number the method
of the service that is important or relevant.