Charanjit Talwar, J.:— This is an application by the petitioners under Section 41 read with IInd Schedule of the Arbitration Act and Order 39, Rule 2 of the Code of Civil Procedure seeking that pending disposal of their petition under Section 20 of the Arbitration Act, the respondents, viz., State Trading Corporation of India Ltd., be restrained from realising the amount of the bank guarantee bearing No. 23 of 1984 dated the 28th February, 1984 which was issued by the Andhra Bank, Connaught Circus, New Delhi.

2. To appreciate the rival contentions of the parties, I may note a few admitted facts: —

(1) That the petitioners entered into a contract with the respondent Corporation on 10th September, 1982 being contract No. STC/SUG/MOL/9/82-83 to procure from the nominated mills Indian Cane Malasses as per specifications in such quantities as may be released by the Government from time to time to enable the respondent to fulfil its obligations under its contract with the foreign buyers. The contract was to be effective from 1st June, 1982 for a period of 5 years. (emphasis supplied)

(2) (a) Under Clause 19 of that contract a performance guarantee was to be furnished by the petitioners. That clause reads as under: —

“9. PERFORMANCE GUARANTEE:

The Agents will furnish to STC a revolving Bank Guarantee for 10 per cent of FOB value of the goods covered by each export contract on the format prescribed by STC for due performance by the Agents of all the terms and conditions of this and the export contract. The said performance guarantee would also cover the liability of the Agents for demurrage. The guarantee will revolve from one export contract to the other till the last shipment that they are required to make is made by the Agents. The Bank guarantee would be furnished prior to the commencement of the first shipment and would remain valid for 30 days after shipped against export contract whichever is later. Notwithstanding the revolving bank guarantee mentioned herein above, which the Agents will furnish to STC, the liability of the Agents in respect of claims on STC on account of quality, quantity, demurrage or any other ground will not remain restricted to the period and/or value covered by the said guarantee. In other words the Agents will always remain fully liable to STC for any or all claims made on STC and also for all losses, costs and expenses that STC may be put to or suffer regardless of the value or the claim period mentioned in the aforesaid bank guarantee.”

(b) Accordingly a revolving bank guarantee on behalf of M/s. J. R. Enterprises (petitioners herein) for the performance of the above said contract was made by the Andhra Bank.

(c) The relevant terms of the guarantee on which emphasis has been laid by counsel for the parties in support of their rival contentions read as follows:

“NOW THIS REVOLVING GUARANTEE WITNESSES AS FOLLOWS:

1. The Bank do hereby unconditionally and irrevocably guarantee that if the Agents fail to perform any of their obligations, contained in the said contract dated 10-9-82 including any amendments or modifications to the aforesaid. Contract dated 10-9-82 made between the Agents and the STC, the Bank shall pay forthwith to the STC such amount or amounts as the bank may be called upon to pay subject to the maximum of Rs. 10 lakhs (Rupees Ten lakhs) plus interest at the rate of 22.5 pet cent per annum from the date the Bank may be called upon by the STC to pay till the date of receipt of payment by the STC. This guarantee at all times during its currency be valid and ensure to the benefit of the STC for not less than the above amounts of Rs. 10 lakhs, plus interest as aforesaid.

PROVIDED that the guarantee herein furnished shall be released and discharged after the expiry of 30 days from the date of the shipment of the last lot of the goods, in respect of export contract between the STC and the foreign buyers.

2. This guarantee shall not be affected by any change in the Constitution of the Bank or of the Agents and or of the STC.

3. Any amount notified to the Bank in writing by a General Manager of the STC as being due from the Bank under or by virtue of this revolving guarantee shall be conclusive evidence against the Bank of the amount due to the STC and shall not be questioned by the Bank.” (Emphasis added)

(3) That disputes have arisen between the parties which according to the petitioners have to be referred to arbitration as per the arbitration agreement contained in the said contract.

(4) That under the contract, the last shipment was made on 21st July, 1985.

(5) That the respondents invoked the bank guarantee on 27th February. 1986.

(6) That the validity of the bank guarantee was extended by the Andhra Bank till 31st August, 1986 by a letter of the 10th March, 1986, although the guarantee was to expire on 28th February, 1986.

3. The petitioner's case in nut shell is that the invocation is no strictly in terms of the bank guarantee. The submission is that under the proviso to clause (1) quoted above, the guarantee stood discharged after the expiry of 30 days from the date of last shipment i.e 21st July, 1985.

4. The respondents, however, contest this proposition. Mr. Watel, their learned counsel submits that the said proviso laying down be limitation, applies only in respect of one of the obligations of the petitioners and that obligation relates to shipment of the molasses. He submits that shipment is not the only obligation under the contract. According to the counsel, under the said contract the other obligations were procurement of molasses, its storage and transportation for shipment.

5. Apart from the above contention, Mr. Watel has made three further submissions:

(1) That the petitioners have no locus standi to seek the relief in this application as they are strangers qua the bank guarantee.

(2) That the document (bank guarantee) being a commercial document, must be read as a whole and be so interpreted so as to show its business efficacy, and

(3) By extending the bank guarantee till 31st August, 1986 after its invocation though the last shipment was made on 21st July, 1985, shows that the petitioners were aware that it was not restricted to their obligation of shipment only.

6. Thus, it is submitted that under the terms of guarantee which guarantee is unconditional and irrevocable, the respondents, cannot be restrained by an injunction from realising the amount of the said bank guarantee from the Andhra Bank.

7. I may note at this stage that so far the respondents have not filed their written statement to the petition under section 20 of the Arbitration Act. Neither from the reply to this application nor from any of the document it is clear as to why shipments of the molasses were not asked to be made by the respondents after 21st July, 1985. However, copies of some letters which have been placed on record do show that considerable quantity of molasses had been procured and stored by the petitioners at Bombay presumably for the purpose of shipment. During arguments Mr. Watel informed me on my asking that a policy decision had been taken at the relevant time not to ship further molasses out of India because of its shortage in the country.

8. The contract in question dated the 10th September, 1982 shows that the petitioners had agreed “severally and jointly to procure from the nominated mills Indian Cane Molasses of the specification and quality, specified in STC's contracts concluded/to be concluded with the foreign buyers (hereinafter called the goods) in such quantities as may be released to STC by the government from time to time to enable STC to fulfil its obligations under its contract (s) with foreign buyers).”

9. Thus the contract was entered into between the parties specifically to enable the respondents to fulfil their obligations under contracts with foreign buyers. Its clause 1 (General) makes the intention further clear that the procurement transportation, storage and loading of the Indian Cane Molasses in ships by the petitioners was with a view to enable the STC to perform, fulfil the export contracts which it had concluded or was to conclude with foreign buyers. That clause reads as under:

“1. General:

(i) This contract will be for a period of five years effective from 1-6-1982.

(ii) The contract can be terminated at any time with six months' notice by either side without assigning any reason whatsoever.

(iii) The Agents jointly and severally agree and undertake to perform and fulfil all obligations, covenants and agreements which STC may undertake to perform, fulfil and observe under and/or by virtue of export contract (s) that STC may conclude with its foreign buyers for export of the goods and these obligations covenants and agreements include any additions or amendments thereto as may be agreed to by and between STC and its foreign buyers with mutual consent of the Agents. Such obligations etc. undertaken by the Agents to be performed, fulfilled and observed include, without being restricted to, inspection, procurement, movement, transportation, storage and loading into ships of the goods, as may be provided in the export contracts and discharge of any excise or other bonds/guarantees that may be given by STC to the concerned authorities.

(iv) The Agents will also comply with the requirements of letter (s) of credit to be established by STC's FOREIGN BUYERS INCLUDING GIVING CABLE ADVICE of shipments made and despatch of advance copies of non-negotiable sets of documents to the foreign buyers and/or their nominees.”

10. Clause 1 of the Bank Guarantee which has already been noticed, is to be construed keeping in view the paramount conditions of the said contract. Mr. Watel agrees that there are two limitations provided therein. He does not dispute that although the revolving bank guarantee which was furnished by the bank was to cover for:

“10 per cent of FOB value of the goods covered by each export contract for due performance by the agents of all the terms and conditions of the aforesaid contract.”

Yet under its clause 1, the bank was liable to pay subject to a maximum of Rs. 10 lakhs plus interest at the specified rate to the STC. This means that even if the particular export contract of the STC for one shipment was for more than a crore, the bank was liable to pay, when called upon, a maximum of Rs. 10 lakhs irrespective of the FOB value of the goods. The submission, however, is that the proviso (quoted above) which lays down that the guarantee furnished would be discharged after the expiry of 30 days from the date of shipment of the last lot of goods is confined only to the obligation of shipment and not to other obligations. In support of his contention that this proviso must be read to mean that the limitation provided therein relates only to the obligation of shipment, he relies on DDA v. Durga Chand Kaushik. AIR 1973 S. C. 2609 wherein it has been held that in construing the document one must have regard not to the presumed intention of the parties but to the meaning of the words they have used therein. Their Lordships approved of the rule settled by that Court in Radha Sunder Datta v. Mohd. Jahadur Rahim (AIR 1959 SC 24 at P. 29). In that case it was observed:

“Now it is a settled rule of interpretation that if there be admissible two constructions of a document, one of which will give effect to all the clauses therein while the other will render one or more of then nugatory, it is the former that should be adopted on the principle expressed in the maxim “ut res magis valeat quam pereat.”

11. In Durga Chand's case, the covenant of the lease deed (covenant 9) dealing with the enhancement and renewal of the lease deed fell for consideration. By the deed, the plaintiff was leased from 1st April 1931, a plot of land situated in Pahar Ganj, Delhi for a period of 90 years. The plaintiff had been asked and made to pay enhanced rents within the said period of 90 years. The said covenant laid down that the renewal was to take place only at the end of the term thereby granted i.e 90 years. The next covenant laid down that the right of enhancement could be exercised only when the lease was renewed. After noticing relevant terms of the lease deed it was held that covenant 9 could apply only after the termination of the initial period of 90 years, inspite of the proviso to it which read “subject always to the exception, reservations and conditions and covenant hereinafter contained.” In paragraph 24 (at page 2615) of the reported judgment, it has been held:

“We think that the proviso to covenant No. 9 could be said to suffer from the vice of an uncertainty which can only be removed by ignoring the words creating this uncertainty. We think that, in such a case, the ambiguous words can be disregarded so that the terms of the earlier operative part of the demise, which are clear, must prevail.”

12. Another judgment cited by Mr. Watel on interpretation of documents is Sahebzada Mohammed Kamgarh Shah v. Jagdish Chandra Deo Dhabal Deb, AIR 1960 S.C 953. It lays down that the intention of the parties to a document of grant has to be gathered by the words used by the parties themselves. In doing so the parties must be presumed to have used the words in their strict grammatical sense. It was held that:

“If and when the parties have first expressed themselves in one way and then go on saying something which is irreconcilable with what has gone before, the courts have evolved the principle, on the theory that what once had been granted cannot next be taken away, that the clear disposition by an earlier clause will not be allowed to be cut down by a later clause. Where there is ambiguity it is the duty of the court to look at all the parts of the document to ascertain what was really intended by the parties.”

13. The third judgment cited by the learned counsel on this aspect is The Union of India v. M/s D. N. Revri & Co: and others, AIR 1976 SC 2257 which, inter alia, lays down that a contract being a commercial document must be interpreted in such manner as to give efficacy to the contract rather than to invalidate it.

14. In view of the unambiguous intentions of the parties herein that the contract in question for performance of which the guarantee was furnished was to enable the STC, respondents herein to fulfil their obligations under their contracts with the foreign buyers, at this stage when there is no specific averment as to why the respondents did not seek further shipments, it is difficult to hold that the proviso to clause 1 of the guarantee pertains only to the obligation of shipment.

15. I may note that in reply to this application the case of the respondents is that the petitioners have put the STC to a loss of more than a crore of rupees. The petitioners also claim that much of amount. These disputes in case they are held to be referable, will be decided in the main suit under section 20 of the Arbitration Act. But as I have said, prima facie, it appears that the bank guarantee stood discharged after the last date of shipment particularly so in view of the fact which has been urged before me during arguments that the further shipments were discontinued because of the policy of the State.

16. The other main question is whether the petitioners have locus standi to move the present application. Reliance of Mr. Watel is on an observation in M/s. Harprashad and Co. Ltd. v. M/s Sudarshan Steel Rolling Mills and others, AIR 1983 Delhi 128 wherein it has been stated that the party on whose instance the guarantee had been furnished is, in a way, stranger to he said contract of bank guarantee. In paragraph 19 of the reported judgment on which reliance has been placed it has been held that: —

“A bank guarantee is a contract between the issuing bank and the person in whose favour the guarantee has been furnished. Though the bank guarantee may have been issued by the banker at the instance of its client, as far as the bank guarantee is concerned, it is a bilateral contract between he banker and the party in whose favour the guarantee has been furnished. The party at whose instance the guarantee has been furnished, is in a way, a stranger to the said contract of bank guarantee. The person in whose favour the bank guarantee has been issued has a right to ask the bank to fulfil its obligations in terms of the bank guarantee. If the terms of the bank guarantee entitle a party to ask for the payment of money from the bank then that right cannot be interfered with merely for the reason that there exists a dispute between that party and the client at whose instance the bank guarantee had been issued.”

17. There is no doubt that simply because disputes have arisen in the present case between the parties, that ground by itself does not entitle the petitioners to move the court for injunction restraining the performance of a contractual obligation of the Andhra Bank. But in the view which I have to that prima facie the guarantee stood discharged, can it be said that the petitioners at whose instance the guarantee was furnished are total strangers. Mr. Divan, learned counsel for the petitioners submits that there is no absolute rule prohibiting grant of interim injunction in a case like the present on the asking of a party at whose instance the guarantee was furnished. He relies on M/s. Arul Murugan Traders v. Rashtriya Chemicals and Fertilisers Ltd., AIR 1986 MADRAS 161 wherein the learned single Judge of that Court has held that in a case where an element of fraud exists, an injunction to prevent one of the parties to the contract from deriving unjust enrichment by invoking bank guarantee can be granted. He has also cited the principle of law laid by the Supreme Court in United Commercial Bank v. Bank of India, AIR 1981 SC 1426 for his contention that not only in the case of fraud but also in cases where the terms of the guarantee had not been fulfilled the bank is not bound to pay. He relies on the observation in paragraph 43 of that reported judgment which reads as follows:

“The appellant presumably knew little or nothing about mustard oil. Bankers are not dealers in mustard oil in such a case as this, but dealers in documents only. The appellant as the issuing bank was presented with documents and asked to pay a very large sum of money in exchange for them. Its duty was not to go out and determine by physical examination of the consignments, or employment of experts, whether the goods actually conformed to the contract between the buyer and the seller, nor even determine either from its own or expert advice whether the documents called for the goods which the buyer would be bound to accept. The banker knows only the letter of credit which is the only authority to act, and the documents which are presented under it. If these documents conform to the letter of credit, he is bound to pay. If not, he is equally not bound to pay. The letter of credit called for ‘Sizola Brand Pure Mustard Oil’ while the railway receipts carried the description “Sizola Brand Pure Mustard Oil ‘Unrefined’ “ and it was not within the province of the appellant to say that the latter description meant identically the same thing as the former.” (emphasis added)

18. In my view in M/s. Harprashad and Co. v. M/s. Sudershan Steel Rolling Mills and others, (Supra) the observation that the party at whose instance the guarantee had been furnished “is in a way stranger to the said contract of bank guarantee” cannot be read to mean that that party is a total stranger. The earlier judgment of a Division Bench reported in Harprashad and Co. v. Sudarshan Steel Rolling Mills and others, AIR 1980 Delhi 173 is applicable to the facts of the present case. Therein it was held that “the terms of the bank guarantee having not been fulfilled the amount under the bank guarantee has not become due for payment to the beneficiary.” I am also bound by decision of this Division Bench. Under the terms of the present bank guarantee the amount does not seem to have become due for payment to the beneficiary. Therefore, as per the principle laid down in the earlier judgment of Harprashad & Co. v. Sudarshan Steel Rolling Mills and others, the demand of the respondents being the beneficiary of the bank guarantee, is prima facie liable to be rejected by the bank. In case injunction as sought for is not granted, the petitioners are going to be put to irreparable loss. Mr. Divan has further shown me documents on the record wherein the petitioners had informed the respondents that they were asking the bank to extend the guarantee without prejudice to their rights. In the letter of 7th March, 1986 (at page 97 of the documents file) written on behalf of the petitioners to the STC, it has been stated:

“Without prejudice and without entering into any controversy with you at this stage we are advising Andhra Bank to have the above Bank Guarantee extended upto 31st August, 1986. You are now requested to write to our Bank as per draft letter enclosed with out letter dated 6th March. Upon receipt of this letter we will do the necessary follow-up.

Thanking you.”

19. The conduct of the party in getting the bank guarantee extended which was without prejudice to their rights cannot thus be used against them. The balance of convenience is also in favour of the petitioners who have raised a bona fide contention which merits to be tried. I may note that although no element of fraud exists yet the guarantee having been invoked after it had prima facie expired, I consider it a fit case that during the pendency of the suit, the injunction sought for in this application be granted. I order accordingly. However, keeping in view that the matter raises important questions of law, I direct that the suit be tried expeditiously and, if possible, be disposed of within four months. I further direct the petitioners to extend the bank guarantee in question for another six months from today.

20. The respondents to file their written statement within a fortnight. Replication to be filed within a fortnight thereafter. Suit be listed on 3rd October, 1986 for further proceedings and for framing of issues.

IA stands disposed of.

Injunction granted.