Prabir Kumar Majumdar, J.

(1) THE respondent, Metallurgical engineering Consultants (India) Limited, instituted a suit under Order 37 of the Code of Civil Procedure, being Suit No. 1007 of 1989 (Mettalurgical engineering Consultants (India) Ltd. , v. Indian Bank), on a bank guarantee bearing No. 417 dated July 17, 1987 for a sum of Rs. 73,74,000/- furnished by the defendant, Indian Bank (i. e. , the appellant before us) at the instance of a party to the underlying contract, M/s. SCIL India Limited (formerly simon-Carves India Limited ). Thereafter the plaintiff, being the respondent before us, took out a summons for final judgment for the said sum of Rs. 73,74,000/- when the defendant, Indian Bank, the appellant before us, failed and neglected to honour the bank guarantee for such sum upon invocation by the beneficiary, i. e. , the respondent herein. The defendant (i. e. , the appellant before us) also took out a summons for leave to defend the said suit instituted by the respondent against the appellant. The learned trial Judge by an order dated April 6, 1992 dismissed the appellants application for leave to defend the said suit and allowed the respondents application for final judgment. The said order dated April 6, 1992 passed by the learned Trial Judge is the subject matter of both these appeals.

(2) IN both the appeals, the only issue which calls for our consideration is whether there is any triable issue and whether the appellant should be granted leave to defend the suit. As stated above, the said suit under Order 37 of the Code of Civil Procedure as on the bank guarantee for a sum of Rs. 73,74,000/- mentioned hereinbefore.

(3) THE bank guarantee is at page 34 of the Paper Book filed in Appeal no, 553 of 1992. It appears from the said bank guarantee that in consideration of the respondents agreeing to pay to the said M/s. SCIL India Limited (hereinafter referred to as the contractor) a sum of Rs. 73,74,000/- as and by way of advance payment, the appellant agreed to furnish the said bank guarantee and undertook to keep the respondent indemnified to the extent of the sum of Rs. 73,74,000/- from and against all losses and damages that might be caused to or suffered by the respondent in relation to the advance payment to be made by the respondent to the contractor. Under the said bank guarantee, the appellant also agreed to forthwith on demand pay to the respondent any sum or sums not exceeding Rs. 73,74,000/- as might be claimed by the respondent to be due from the contractor by way of refund of such advance payment or any portion or otherwise, losses and/or damages, costs, charges or expenses by reason of default or defaults on the part of the contractor as aforesaid.

(4) CLAUSE 2 of the said bank guarantee is an important Clause which is set out below:-"notwithstanding anything to the contrary your decision as to whether the Contractor had made any such default or defaults and the amount or amounts to which you are entitled by reason thereof will be binding on us and we shall not be entitled to ask you to establish your claim or claims under this Guarantee but will pay the same on demand without any objection."

(5) IT also appears from the other Clauses of the bank guarantee, viz, clauses 4, 6 and 7, that the respondent would have the fullest liberty without affecting the said bank guarantee from time to time to vary any of the terms and conditions of the underlying contract or extend time of performance of the contract or to postpone for any time or from time to time any of the rights or powers of the respondent against the contractor and either to enforce or forbear to enforce any of the terms and conditions of the contract and the appellant would not be released from its liability under the said bank guarantee by the exercise of the respondents liberty with reference to matters aforesaid, that the respondent would be entitled to act as if the appellant was the respondents principal debtor in respect of all the claims of the respondent against the contractor and the appellant expressly waived all its rights or suretyship and other provisions of the bank guarantee, and that the bank guarantee would cover all claim or claims of the respondent against the contractor from time to time arising out of or in relation to the said contract and in respect of which the respondents demand or notice in writing was received by the appellant before the date of expiry of the guarantee mentioned above.

(6) SO it appears from the said bank guarantee, particularly from Clause 2 thereof, which has been set out above, that notwithstanding anything to the contrary, the respondents decision as to whether the contractor had made any default or defaults and the amount or amounts to which the respondent was entitled, would be binding on the appellant and the appellant would not ask the respondents to establish it claim or claims under the guarantee. It appears to be an absolute obligation under the said bank guarantee on demand without any objection and that the respondents decision as to whether there had been any default on the part of the contractor and for that matter whatever amount was due and payable by the contractor, would be binding on the appellant-Bank.

(7) IT is now a settled law that when a Bank under the guarantee furnished by it undertakes to pay the amount covered by the guarantee, the Bank should pay to the beneficiary such amount upon demand, if such demand is made in accordance with the terms of the bank guarantee. In the instant case, the appellant-Bank has to pay the sum on demand without any objection and on the decision of the respondent as to whether the contractor had made any default or defaults and also as to the amount or amounts the respondent is entitled to by reason of such default on the part of the contractor, which decision would be binding on the appellant-Bank and would not be questioned by the appellant-Bank. We have no doubt that the appellant-Bank under the said bank guarantee is under on absolute commitment to pay the amount covered by the bank guarantee upon proper invocation thereof, notwithstanding anything to the contrary. It also appears to us from other Clauses of the bank guarantee as indicated above that the appellant-Bank had committed itself without any reservation to pay the amount covered by the bank guarantee on demand as would be claimed by the respondent and any variation of the rights or powers of the respondent against the contractor, if any, would not affect the bank guarantee. It, therefore, appears to us that on this bank guarantee there is absolute liability on the appellant-Bank to pay the sum on invocation of such bank guarantee.

(8) THE appellant has, however, submitted that the said bank guarantee is subject to another Clause, being Clause 12 of the said Bank guarantee, which, inter alia, stipulates that the value of the guarantee would be reduced to the extent advance is adjusted against running account bills on half-yearly basis. The said Clause 12 is as follows :-"the value of the Guarantee shall be reduced to the extent advance is adjusted against running account bills on half-yearly basis.

(9) IT is submitted on behalf of the appellant that even upon proper invocation the appellant-Bank is not obliged to pay the full amount covered by the bank guarantee, i. e. , the sum of Rs. 73,74,000/-, but the said amount should be reduced to the extent of the advance which is adjusted against running account bills on half - yearly basis. It is also the submission on behalf of the. appellant that if there is any dispute as to such adjustment between the contractor and the respondent, then the appellant-Bank in view of such Clause 12 of the bank guarantee is not obliged to pay the full amount covered by the bank guarantee. In the circumstances, the appellant is entitled to refuse to honour the bank guarantee until the question of adjustment is settled between the respondent and the contractor and this is sufficient to enable the appellant to ask for leave to defend the suit. According to the appellant, there are disputes between the respondent and the contractor as to adjustment and the appellant-Bank has been asking the respondent to let the Bank know how much was adjusted against the sum advanced by the respondent to the contractor. Until such adjustment is notified to the appellant-Bank, the appellant banks liability to honour the bank guarantee is postponed and the appellant-Bank, in that event, would only be called upon to pay the sum covered by the bank guarantee as reduced to the extent of the advance as adjusted against the running account bills on half yearly basis. We are not inclined to accept this interpretation of the bank guarantee, as sought to be given by the appellant. If we go through the other Clauses of the bank guarantee as indicated above, it will be clear that the appellant-Bank absolutely committed itself to honour the bank guarantee by paying the sum as claimed by the beneficiary, i. e. , the respondent, as restricted to the amount covered by the bank guarantee, i. e. , the sum of Rs. 73,74,000/ -. The appellant-Bank is not, however, obliged to pay any sum more than the sum of Rs. 73,74,000/- even if the losses or damages alleged to be suffered by the respondent are more than the sum covered by the bank guarantee.

(10) APART from the interpretation of the Bank Guarantee, on factual aspect also we find that the bank undisputedly acknowledged the respondents right to claim the sum covered by the Bank Guarantee and also it was the banks absolute commitment to pay the sum covered by the Bank guarantee. It appears that by a letter dated 19th October, 1989 the respondent metallurgical Engineering Consultants (India) Ltd. made a demand from the bank for the payment against the Bank Guarantee No. 417 dated 17th July, 1987 for Rs. 73,74,000/ -. This is formal letter of invocation in terms of the Bank guarantee and by this letter the respondent called upon the defendant bank, who is the appellant before us, to pay the said sum of rs. 73,74,000/- in terms of the aforesaid Bank Guarantee. The respondent by a further letter dated 27th November, 1989 apprised the appellant Bank that it was settled law that the Bank Guarantee constituted a separate and distinct contract between the beneficiary and the guarantor bank and it had no relationship whatsoever with the contractor for any purported dispute between the contractor and the beneficiary. The appellant bank by a letter dated 5th December, 1989 in reply to the said letter of the respondent dated 27th November, 1989 stated that the appellant would stand by its commitment under the guarantee and the appellant bank by the said letter asked for a few more days for appropriate action. But it appears to us that in spite of this commitment the appellant bank took a stand as would appear from the few letters incorporated in the paper-book that the appellant bank advised the respondent beneficiary of the bank guarantee to sort out the matters with the contractor and withdraw the letter of invocation of the bank guarantee pending amicable settlement. This will appear from the letter dated 6th November, 1989 at page 186 of the Paper Book in Appeal No. 553 of 1992.

(11) WE have already indicated the relevant terms of the bank guarantee and it would appear from the said hank guarantee that the respondents obligation to pay is absolute and bank is not concerned with the disputes, if any, arising under the underlying contract between the respondent and the contractor. It is settled law that bank is to honour the bank guarantee if the invocation is in terms of the bank guarantee - and in the instant case there has been proper invocation of the said bank guarantee. Moreover, it appears from one of the letters of the contractor, viz. , SCIL India Limited dated August 29, 1988 addressed to the appellant bank that the subject guarantee reduction would not be affected by the beneficiary and the contractor requested the appellant bank to process the extension as per the beneficiarys requirement upto 30th September, 1989 for the full value. Assuming there is some dispute between the contractor and the respondent that will not be a reason for the appellant bank for not honouring the bank guarantee. We need not restate the law. The law is settled on this question of obligation of the bank under a bank guarantee.

(12) BY a recent judgment of the Supreme Court reported in AIR 1994 SC 626 [LQ/SC/1993/920] (Svenska Handelsbanken v. M/s. Indian Charge Chrome and Ors.) the law as to the banks obligation under the bank guarantee is restated. There is a series of decisions of the Supreme Court on the question as to the banks liability under the bank guarantee. It is settled law that the bank cannot refuse to honour the bank guarantees except where there is case of established fraud or a case of irretrievable injustice. So, if it is an unconditional bank guarantee then the bank shall forthwith pay the amount covered by the bank guarantee on demand by the beneficiary and the bank is to pay the amount of the bank guarantee without any demur or objection and irrespective of any dispute between the parties to the underlying con-tract, in the instant case, the respondent and the contractor. A decision has also been referred to on behalf of the respondent that is reported in (1973) 2 Lloyds Law Reports 437 (Bache and Company (London) Limited v. Banque Vemes Et Commerciale De Paris S. A. ). There the beneficiary claimed against the bank under a bank guarantee the sum covered by the bank guarantee. In that case the English brokers issued a writ against the frensh bank claiming 60,000 as due under the guarantee. By way of defence the French bank sought to contest that amount. They said that the accounts between the English brokers and the French trading company had been presented erroneously by the English brokers, that the indebtedness was the other way round. Furthermore, the Bank referred to proceedings before the Tribunal de Commerce in Paris which had been instituted by the French trading company in which the French trading company claimed a large sum as being due to them. The French bank sought to take advantage of that dispute so as to say : The amount which was being sued for was not correct, and therefore the bank need not pay. The bank however did not suggest that there was fraud. But they said that the matter had riot been investigated and they ought to have leave to defend the case. Lord Denning, M. R. delivering the judgment along with other Law Lords held and observed that the evidence showed that it was customary within the trade for a member of the association, dealing with a principal who was foreign, or whose reserves were uncertain, to demand a bank guarantee, not only to protect himself against his principals possible impecuniosity, but also so as to be able to put himself in funds straightaway in the event of his being called upon to honour his personal liability on his principals behalf. This was such a guarantee and was called upon only when the plaintiffs were themselves called upon to account to the clearing house which they did. Such being the commercial practice, it was only right that brokers should be able to turn to the French bank and say : "on our giving you notice of default, you must pay. " The French bank can in turn recover the sum from their own customer, the French trading company. No doubt they had taken security for the purpose. Lord Denning further observed that this did not led to any injustice because if the figure should be erroneous, it was always open to the French trading company to have it corrected by instituting proceedings against the brokers, in England or in France, to get it corrected as between them. Relying on this decision it has been submitted on behalf of the respondent that no irretrievable injustice could be caused to the appellant bank even assuming there was a demand for a sum which the beneficiary was not entitled to claim, then the appellant bank is not without any remedy. It can proceed by taking appropriate proceedings against the party making an erroneous demand. It is further submitted on behalf of the respondent that even assuming the sum of the bank guarantee is subject to reduction in view of some adjustment, which is a matter absolutely between the respondent and the contractor, the bank can in no way disclaim its liability to pay the sum covered by the bank guarantee which the bank agreed in absolute terms to the beneficiary upon demand. According to the respondent, there is no triable issue and as such the learned trial Judge rightly dismissed the appellant banks application for leave to defend.

(13) WE accept the contention of the respondent. It appears to us from the terms of the said bank guarantee that the banks liability is. absolute and the bank should pay the sum as claimed by the respondent under and in terms of the said bank guarantee. We [have also adverted to few letters of the appellant which would indicate that the appellant also accepted this position. But strangely enough it appears that the bank has taken upon itself the stand which could have been taken by the party at whose instance such bank guarantee had been furnished. Even if there are some genuine disputes between the parties to the underlying contract, that cannot restrain the bank from making the payment under the bank guarantee on demand by the beneficiary and upon invocation of the bank guarantee in terms of the bank guarantee. Where the bank guarantee is unconditional, as the present bank guarantee is, the bank is in no way concerned with the disputes - real or imaginary - between the party furnishing the bank guarantee that is, the: contractor and the beneficiary being the respondent in this appeal.

(14) IT has been submitted on behalf of this appellant bank that the order of the trial Court is without reasons and simply there has been an order dismissing the appellant banks application for leave to defend. It is, therefore, submitted on behalf of the appellant bank that this Court should remand the entire matter to the trial Court for hearing de novo. A decision of the Supreme Court is cited in support of the said proposition. This is the decision reported in AIR 1969 SC 1167 [LQ/SC/1969/121] (Smt. Swaran Lata Ghosh v. Harendra Kumar Banerjee and Aw. ). This case is on the facts that plaintiffs four witnesses were examined. The plaintiff tendered extracts from certain bank accounts and correspondence. It appears that the suit was at a regular trial on evidence. In that context of fact possibly it could be said that if there are no reasons in the order (under appeal then the appeal court would be in an embarrassing position to understand as to what weighed with the learned trial Judge. But here in the instant case as is well known that an application for leave to defend would be decided on affidavits and all the relevant affidavits are before us and are incorporated in the paper book and all the relevant correspondence are also incorporated in the paper book. So, it would not be difficult for the Court below to find out from these documents and materials whether there could be Any triable issue and whether such leave should be granted under Order 41, rule 24 of the Code of Civil Procedure it is stated that where evidence on record is sufficient, the appeal Court may determine the case finally. Therefore, we do not entertain this contention made on behalf of the appellant.

(15) WE find that the trial Court rightly dismissed the application of the appellant for leave to defend and also rightly allowed the application of the. respondent for final judgment. We confirm the orders of the trial Court. Both the appeals are dismissed with costs. Such costs would also include the cost of preparation of the paper-book prepared by the respondent by an order of the Appeal Court. Interim order, if any, is vacated.

(16) IT appears from the order of the Appeal Court while admitting the appeal that certain amount was directed to be deposited with the Manager, park Street Branch of the appellant bank who held the sum as Receiver without security and without remuneration. The Manager of concerned branch of the bank is directed to make over the sum held by him on deposit together with accrued interest to the respondent-plaintiff within 3 weeks from the service of signed copy of the operative protion of this judgment and the respondent would recover the same in protanto satisfaction of its decretal claim.

(17) THE learned counsel for the appellant prays for stay of operation of this judgment and order. We refuse to grant such prayer.

(18) ALL parties including the Manager of the concerned Bank are to act on a signed copy of the minutes of the operative portion of this judgment on the usual undertaking. Appeals dismissed.