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Showing posts with label bank guarantee. Show all posts
Showing posts with label bank guarantee. Show all posts
Saturday, October 1, 2016

Whether the High Court is justified in exercising its discretionary jurisdiction under Article 226 of the Constitution of India for restraining the appellant from invoking an unconditional bank guarantee executed by the first respondent,= In Himadri Chemicals Industries Limited v. Coal Tar Refining Company[2], at paragraph -14: “14. From the discussions made hereinabove relating to the principles for grant or refusal to grant of injunction to restrain enforcement of a bank guarantee or a letter of credit, we find that the following principles should be noted in the matter of injunction to restrain the encashment of a bank guarantee or a letter of credit: (i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the beneficiary is entitled to realise such a bank guarantee or a letter of credit in terms thereof irrespective of any pending disputes relating to the terms of the contract. (ii) The bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. (iii) The courts should be slow in granting an order of injunction to restrain the realisation of a bank guarantee or a letter of credit. (iv) Since a bank guarantee or a letter of credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of bank guarantees or letters of credit. (v) Fraud of an egregious nature which would vitiate the very foundation of such a bank guarantee or letter of credit and the beneficiary seeks to take advantage of the situation. (vi) Allowing encashment of an unconditional bank guarantee or a letter of credit would result in irretrievable harm or injustice to one of the parties concerned.” Guarantee given by the bank to the appellant contains only the condition that in case of breach by the lead promoter, viz., the first respondent of the conditions of LoI, the appellant is free to invoke the bank guarantee and the bank should honour it … “without any demur, merely on a demand from GMB (appellant) stating that the said lead promoter failed to perform the covenants…”. It has also been undertaken by the bank that such written demand from the appellant on the bank shall be … “conclusive, absolute and unequivocal as regards the amount due and payable by the bank under this guarantee”. Between the appellant and the first respondent, in the event of failure to perform the obligations under the LoI dated 06.02.2008, the appellant was entitled to cancel the LoI and invoke the bank guarantee. On being satisfied that the first respondent has failed to perform its obligations as covenanted, the appellant cancelled the LoI and resultantly invoked the bank guarantee. Whether the cancellation is legal and proper, and whether on such cancellation, the bank guarantee could have been invoked on the extreme situation of the first respondent justifying its inability to perform its obligations under the LoI, etc., are not within the purview of an inquiry under Article 226 of the Constitution of India. Between the bank and the appellant, the moment there is a written demand for invoking the bank guarantee pursuant to breach of the covenants between the appellant and the first respondent, as satisfied by the appellant, the bank is bound to honour the payment under the guarantee. Therefore, the appeal is allowed and the impugned judgment is set aside. However, we make it clear that this judgment will not stand in the way of the first respondent working out its grievances in appropriate proceedings as permitted under law.

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                        IN THE SUPREME COURT OF INDIA                         CIVIL APPELLATE JURISDICTION                     ...
Tuesday, February 7, 2012

Since the validity of the bank guarantee expired on 17 August 2010 the aforesaid amount should have been deposited by bank concerned in terms of the aforesaid clause. Accordingly, we direct the concerned Chief Manager (COCS), CAG Branch, Kolkata to show cause as to why appropriate order should not be passed making the bank liable for not paying the aforesaid amount in terms of the bank guarantee clause. It would be open for the concerned Chief Manager on behalf of the bank to appear before this Court, if so advised and to show cause as to why such appropriate order should not be passed.

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GA No. 1952 OF 2011 WITH APO 343 of 1998 AC 98 of 1993 IN THE HIGH COURT AT CALCUTTA Civil Appellate Jurisdiction ORIGINAL SIDE EASTERN COAL...

Bank Guarantee =In rare cases when a Court interferes and restrains invocation of 4 bank guarantee, ordinarily a direction is issued for renewal of the bank guarantee if its validity is likely to expire in the near future. In the present case, however, the validity of the bank guarantee had expired prior to the order of injunction being made but the claim period was valid till 21.4.2009. The petitioner, in the considered view of this Court, took advantage of the omission in the order dated 19.3.2009 as well as in the subsequent order dated 23.3.2009 and attempted to steal a march by flatly refusing to give consent in respect of extension of bank guarantee. In all fairness, he should have consented to such extension having obtained an interim order by invoking the equity jurisdiction of this Court. This is a case where the maxim actus curiae nemenim gravabit would apply with full force. In the event the writ petition filed by the petitioner ultimately fails, the Corporation would find itself in a difficult position in the absence of any security.

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1 1.4.2010 CAN 10274 of 2009 with W.P.No.5420 (W) of 2009 Sanjay Jhunjhunwalla …Petitioner Vs. Damodar Valley Corporation & ors. …Respon...

Bank Guarantee-Invocation of-Contract between parties-One of the parties furnishing Bank Guarantee in favour of the other Guarantor seeking injunction of invocation of the Guarantee as there existed a dispute between the contracting parties-Permissibility of-Held: In the facts of the case, the Guarantee was an unconditional one-Hence the same could be invoked by the beneficiary despite pendency of the dispute-Bank Guarantee is an independent contract between the Bank and the beneficiary-bank is obliged to honour its guarantee so long as it is unconditional and irrevocable-The case also does not fall under exceptions-Allegations of fraud and plea of `special equities' are vague and not supported by any evidence. Appellant entered into agreement with the respondent whereby respondent agreed to buy UPS systems from the appellant. Despite supply of all the equipments, respondent defaulted in making the full payment. Respondent agreed to pay the balance sum provided the performance Bank Guarantee of 10% value was furnished. The same was furnished. It was later amended making the same unconditional. Even after furnishing the Bank Guarantee, respondent did not make full payment. Appellant filed injunction application on the ground that respondent was not entitled to invoke the Bank Guarantee without paying the balance amount as the same had become inoperative as the condition precedent for is invocation was not complied with. Trial Court in view of the fact that the Bank Guarantee was made unconditional by its amendment, dismissed the application. Division Bench of High Court confirmed the order. Hence the present appeal. Dismissing the appeal, the Court HELD: 1.1. The bank guarantees which provided that they are payable by the guarantor on demand is considered to be an un-conditional bank guarantee. When in the course of commercial dealings, unconditional guarantees have been given or accepted the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. Bank guarantee is an independent contract between bank and the beneficiary thereof. The bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. [Paras 11 and 12] [902-A-B; 903-A] U.P. State Sugar Corporation v. Sumac International Ltd., [1997] 1 SCC 568; BSES Limited (Now Reliance Energy Ltd.) v. Fenner India Ltd. and Anr., [2006] 2 SCC 728; Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company, (2007) 9 Scale 631 and Mahatama Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd and Anr., [2007] 6 SCC 417, relied on. Hindustan Construction Co. Ltd. and Ors. v. State of Bihar and Ors., [1999] 8 SCC 436, distinguished. 1.2. In the present case a conditional bank guarantee initially was furnished and the bankers were liable to pay the amounts only upon establishing the fact that the supplier was in default for the performance of their warranty obligations under the contract. But subsequent the relevant clause in bank guarantee was amended. The condition that the amounts shall be paid only upon establishing the supplier to be indefault for the performance of their warranty obligation under the contract has been specifically deleted. The bank guarantee as amended replacing relevant para of the original bank guarantee makes the bank guarantee furnished as unconditional one. The bankers are bound to honour and pay the amounts at once upon receipt of written demand from the respondent. [Para 19] [907-C, D, E, F] 1.3. The recitals in the preamble in the deed of guarantee do not control the operative part of the deed. After careful analysis of the terms of the guarantee the guarantee is found to be an unconditional one. The appellant, therefore, cannot be allowed to raise any dispute and prevent the respondent from encashing the bank guarantee. [Para 22] [909-A] 2.1. The case, therefore does not fall within the first exception i.e. there was a clear fraud of which Bank had the notice and a fraud of the beneficiary from which it seeks to benefit. Fraud, if any, must be of an egregious nature as to vitiate the underlying transaction. In the pleadings in the present case no factual foundation is laid in support of the allegation of fraud. There is not even a proper allegation of any fraud as such and in fact the whole case of the appellant centers around the allegation with regard to the alleged breach of contract by the respondent. The plea of fraud is vague and indefinite and such allegations do not satisfy the requirement in law constituting any fraud much less the fraud of an egregious nature as to vitiate the entire transaction. [Paras 23, 24 and 25] [909-B-C, D, E, F] 2.2 The plea that Whether encashment of the bank guarantee would cause "irretrievable injury" or "irretrievable injustice". There is no plea of any "special equities" by the appellant in its favour. There is no dispute that arbitral proceedings are pending. The appellant can always get the relief provided he makes his case before the Arbitral Tribunal. There is no allegation that it would be difficult to realize the amounts from the respondent in case the appellant succeeds before the Arbitral Tribunal. [Paras 26 and 28] [909-G; 910-B, C] Kailash Vasdev, Amita Rajora, Debarshi Bhadra and Shailendra Swarup for the Appellant. V.N. Koura, A. Mariarputham, Aruna Mathur and Paramjit Benipal (for Arputham, Aruna & Co.) for the Respondent.,= 2007(11 )SCR897 , 2008(1 )SCC544 , 2007(12 )SCALE692 , 2007(12 )JT480

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CASE NO.: Appeal (civil) 5121 of 2007 PETITIONER: Vinitec Electronics Private limited RESPONDENT: HCL Infosystems Limited DATE OF JUDGME...

Contract--Termination due to failure to comply specifi- cations--Bank guarantee--Claim for encashment--Liability of Bank--Order restraining Bank from making payment--Legality of.

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The appellant's contract with Indian Airlines included the construction and fabrication of air craft testing cen- tre/engine repair ...

Performance of contract-guaranteed performance in accordance with time schedule prescribed-Failure to perform obligation within time stipulated-Effect of-Bank guarantee Right to invoke-To injunction against.

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% The appellant, a State Government enterprise, on or about May 17, 1983, entered into a contract with the respondent, a pri...