Law:

Section:

Guarantee---Bank guarantee---Interest, payment of-Company, in the present case, had applied to the State Bank of Pakistan for cover of foreign exchange risk on the amount payable to a foreign company in foreign currency which was granted---Dispute arose between the Company and the State Bank regarding the rate of foreign exchange for covering the risk---Dispute eventually landed in Supreme Court in which leave was granted and appeal was decided wherein State Bank was directed to calculate the amount payable by the Company and to recover the same from the bank guarantee furnished by the Company---Bank guarantee showed that interest mentioned therein related to the interest that was payable by the Company to the credit supplier on the principal amount and not on the facility provided by the State Bank of Pakistan---Second guarantee, which had revalidated the earlier one on the orders of the Supreme Court, did not mention the payment of any interest/mark-up---Order of the Supreme Court in compliance with which Bank guarantee was furnished, was silent regarding payment of interest/mark-up---State Bank of Pakistan, in circumstances, was not entitled to debit to the Bank amount of interest in respect of a guarantee furnished by the Bank on behalf of the Company to cover the differential amount regarding which the dispute had arisen between the State Bank and the Company. State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244 distinguished. State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244 ref. JUDGMENT NASIR-UL-MULK, J.---State Bank of Pakistan has, by leave of the Court, filed this appeal against the judgment of the Lahore High Court, Multan Bench, Multan dated 3-12-1999 whereby the Writ Petition filed by Messrs Fatima Enterprises Ltd. (hereinafter referred to as the Company) was allowed and it was held that the appellant was not entitled to debit to Allied Bank Ltd. a sum of Rs.18,312,595.35 by way of interest in respect of a guarantee furnished by the Bank on behalf of the Company to cover the differential amount regarding which a dispute had arisen between the appellant and the Company. 2. The facts relevant for…

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