SPL sources confirmed that the payment was received last week after its application in the high court seeking, among other things, setting aside of the civil court order dated April 29, 1999 was upheld by the high court judge.

In his order dated April 29,1999, the civil court judge had restrained Bank of Baroda from making any payment under the bank guarantee in question because denial of an ex parte injunction would cause the plaintiff (KOEL) ``irreparable loss'' besides damaging their reputation in the market.

Facts of the case show that Bank of Baroda had entered into a deed of guarantee and indemnity with SPL Ltd on December 30, 1998 which was a sequel to a memorandum of understanding (MoU) reached between SPL and Kirloskar OilEngines Ltd (KOEL) on November 24, 1998.

The MoU reveals that KOEL had been packager for Solar Turbines International Company, Singapore (one of the leading manufacturers of gas turbines in the world) also known as SOLAR. KOEL received Rs 2.02 crore from SPL for installation of a one-mw Solar Saturn gas turbine with co-generation system at the Kassar works of SPL in Rohtak district of Haryana in 1994.

Since the turbine never performed satisfactorily, it was agreed between SPL and KOEL that the turbine ``will be removed to Malaysia for the purpose of carrying out the necessary repairs and also for replacement of various parts and ancillaries.''

It was also agreed that post-repairs, KOEL would undertake to erect and install the turbine and guarantee satisfactory performance as set out in the purchase order dated January 15, 1994. Besides, it would incur all incidental costs related to the removal of the turbine and its subsequent installation and that it would give a satisfactory trial for a minimumperiod of 30 days.

KOEL also agreed to provide a bank guarantee for Rs 2.02 crore so that SPL could invoke it and recover the money from the bank directly if the turbine was not repaired and commissioned in time.

The guarantee was subsequently modified to include interest at the rate of 24 per cent from the date of demand being made by SPL upon the bank ``without any demur or raising any objection and without any recourse to KOEL.''

The guarantee specified that the bank would be liable to make payment to SPL in the event that the turbine was not returned and made operative in all respects within 100 days from its removal. SPL was required, as per the guarantee deed, to lodge its claim within seven days from the completion of 100 days from the date of removal of the turbine.

The commencement of removal work from January 4, 1999 was confirmed by KOEL (vide its letter dated January 7, 1999 which stated that the bank guarantee had become effective from January 4, 1999). This fact was also corroborated bythe bank in its letter dated January 8, 1999 stating that the guarantee ``shall remain in force for a period of 150 days from January 4, 1999.''

On April 10, 1999, the chairman and managing director of KOEL, Atul Kirloskar, wrote to SPL managing director Shrikant Somany requesting him to extend the period of the bank guarantee to end-April as the turbine was unlikely to be made operative by April 13, 1999 as agreed upon earlier. He wrote that the machine was on its way back to India after repairs by Solar Turbines, Singapore.

Subsequently, on April 15, 1999 SPL invoked the guarantee on completion of the stipulated 100 days from the effective date. However, KOEL filed an application in the Calcutta high court seeking an order of injunction restraining SPL from receiving money under the bank guarantee.

The high court ordered status quo till April 23, 1999 but rejected KOEL's plea for injunction. Earlier, BoB (vide its letter dated April 15, 1999 to KOEL) acknowledged the invocation of guarantee by SPL. Itfurther advised KOEL to keep ``sufficient'' balance in its account to permit BoB to debit its account by the amount of the guarantee.

SPL officials allege that the bank never assigned reasons for delay in making payments against the guarantee. It was only on May 5, 1999 that they were informed by the legal department of BoB that KOEL had obtained an interim injunction order in the court of civil judge senior division at Pune on April 28, 1999.

In its plaint, KOEL had contended that the calculation of the expiry period of 100 days made by SPL and the bank was incorrect. It added that since the turbine was ``physically removed'' on February 8, 1999 the period of 100 days would be over on May 19, 1999 and pointed out that the invocation of the bank guarantee ``is certainly premature.''

KOEL further submitted that ``SPL with some ulterior motive and some design is trying to take undue advantage of the bank guarantee by misleading the defendant (the bank was made defendant in the civil suit filed in the Punecourt) about the ripening of the payment under the said bank guarantee.''