Appeals concern the auction of assets of a sick company, M/s Bharat Commerce & Industries Limited (BCI), managed by the Industrial Development Bank of India (IDBI)—Auction process faced issues, including the absence of competitive bidding, non—compliance with guidelines, and a failure to furnish a bank guarantee—Division Bench of the High Court set aside the auction, directing a fresh process—Supreme Court upholds the High Court's decision, emphasizing the importance of competitive bidding and compliance with auction guidelines—Money deposited by the appellant is to be refunded, and the Official Liquidator is urged to maximize the property's value through a proper auction process ...
Arbitration and Conciliation Act Section 9 — Indian Contract Act Section 128 — Restraint on encashment of Bank guarantee Held, — bank guarantees cannot be interdicted on account of contractual disputes between the parties Courts would interfere and injunct invocation/encashment of bank guarantees only in exceptional cases of egregious fraud and irretrievable injustice Bank guarantees furnished by petitioner are unconditional Averments made by the petitioner do not disclose any case of fraud, — which would warrant interdicting the bank guarantees — Contention that bank guarantees issued by the petitioner ought to be injuncted on the ground of — irretrievable injustice is unmerited — Petitioner's case is mainly founded on alleged breach of contract on the part of respon...
Petitioner college applied for an increase in post—Graduate seats, and the Medical Council of India granted permission, subject to submitting a bank guarantee—Due to delays in receiving the letter and responding, the petitioner submitted the bank guarantee three days after the due date—Request was rejected due to this delay—Court, considering the circumstances, allowed the petition and directed the respondents to accept the bank guarantee and increase the seats as recommended by the Medical Council. ...
Constitution of India, 1950—Article 226—Bank guarantee—Invocation of—Writ jurisdiction in contractual matters is limited—If it is established that one party, in this case, the respondent, has failed to fulfill its contractual obligations, and the other party, the appellant, has legally canceled a Letter of Intent and invoked a bank guarantee as a result, the legality and propriety of the cancellation are not subject to inquiry under Article 226 of the Constitution—Furthermore, in the relationship between the bank and the appellant, when there is a written demand to invoke a bank guarantee due to a breach of covenants between the appellant and the respondent, and the appellant is satisfied with this breach, the bank is obligated to honor the payment under the guarantee. Civil Procedure Code, 1908&mdas...
Constitution of India, 1950—Article 133—Furnishing of Bank Guarantee—Suggested a way to protect the interests of the appellants—The suggestion was to instruct the respondents to provide a Bank Guarantee for claiming the difference between the old and new rates—This proposal had not been raised before the High Court, and the court advised the appellants to bring this point to the attention of the High Court—The court also requested the High Court to expedite the disposal of the writ petition. ...
Civil Procedure Code, 1908 (CPC)—Section 100A—Respondent, a consignment agent, provided a Bank Guarantee of Rs. 5 lakhs to the Appellant Company for product sales—The guarantee covered breaches, including non-settlement of bills within 30 days—After the Appellant's bills went unpaid, the Bank Guarantee was invoked—Legal proceedings ensued, alleging fraud and seeking an injunction—The Trial Court found the invocation vitiated by fraud, emphasizing the lack of loss or damage and the plaintiff's sincerity in business dealings—The High Court upheld the decision, citing the pleaded fraud—The Supreme Court overturned the judgments, emphasizing the unconditional nature of the Bank Guarantee—It clarified that subsequent breaches don't vitiate the guarantee and that discrepancies in...
Customs Act, 1962—Section 25(1)—Contract Act, 1872—Section 126—Bank guarantee—Context of an unconditional and absolute bank guarantee, the clause specifying that the President of India's demand is conclusive eliminates the bank's right to contest encashment based on the non-fulfillment of export obligations—The bank guarantee's terms, especially the unequivocal liability provision, supersede any contractual dispute raised by the beneficiary—Despite a contractual agreement, the bank's attempt to resist encashment is untenable—The guarantee, as framed, leaves no room for conditional interpretations, reinforcing the bank's obligation to fulfill a cash demand made by the President of India—The terms of the bank guarantee override any agreement between the parties. ...
Contract Act, 1872—Section 126—Bank guarantee—Invocation of a bank guarantee, it was held that a bank guarantee constitutes a separate, distinct, and independent contract between the bank and the employer (State), regardless of the main contract between the contractor and the employer—The bank guarantee was furnished to the Chief Engineer, and since there was no provision in the guarantee indicating that "Chief Engineer" includes "Executive Engineer," the invocation by the Executive Engineer was deemed wholly wrong—The court emphasized that both parties are bound by the terms of the bank guarantee, and its invocation must adhere to those terms—Additionally, to grant an injunction restraining the invocation of a bank guarantee, the terms of the guarantee must be unequivocal and uncond...
Arbitration Act, 1940—Section 41—Contract Act, 1872—Section 126 —Bank guarantee—Court ruled against restraining its encashment—The plaintiff, not repudiating the contract, sought damages for breach of warranty, not contract repudiation—No prima facie case of established fraud or irretrievable injury was shown, as the plaintiff could execute decrees in a friendly country where the suppliers were located—The court emphasized the necessity of demonstrating fraud and substantial harm for injunctive relief in bank guarantee matters, referencing the Itek Corporation case—Consequently, the plaintiff's plea for injunction was dismissed, affirming the possibility of executing decrees in a foreign jurisdiction where the defendants were based. ...
Civil Procedure Code, 1908 (CPC)—Order 39, Rule 1—Bank guarantee—Allowed an appeal concerning the enforcement of a bank guarantee in a construction contract dispute between General Electric Technical Services Company (GETSCO) and Punj Sons (P) Ltd. GETSCO sought encashment of the guarantee after Punj Sons failed to complete the project—Despite a High Court injunction, the Supreme Court ruled that the bank must honor the guarantee absent fraud or irretrievable injustice—The Court emphasized the independence of bank guarantees and the obligation to pay upon demand—The High Court's decision was overturned, affirming the bank's liability under the guarantee—Consequently, the appeal was allowed, the High Court's judgment was set aside, and GETSCO was awarded costs. ...
Constitution of India, 1950—Article 133, Article 3—Civil Procedure Code, 1908 (CPC)—Order 39, Rules 1—Bank guarantee—The autonomy of an irrevocable letter of credit holds significant importance—A letter of credit, particularly in international trade, functions as a crucial mechanism ensuring that the vendor receives payment without interference—The irrevocable nature of a letter of credit guarantees that it cannot be altered or cancelled without consent, thus providing a reliable assurance to the vendor that payment will be made as agreed—The courts generally maintain a hands-off approach concerning the encashment of such letters of credit, except under extraordinary circumstances—Interfering with the encashment can have severe implications for international trade, disrupting the trust...