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2019 (7) TMI 1866 - SC - Indian LawsRefund claim - Invocation of the bank guarantees - whether the Tribunal was justified in interfering with the invocation of three bank guarantees issued to the Appellant and in directing the Appellant to refund the amounts covered by them to the Respondent? - HELD THAT:- The settled legal position which has emerged from the precedents of this Court is that absent a case of fraud, irretrievable injustice and special equities, the Court should not interfere with the invocation or encashment of a bank guarantee so long as the invocation was in terms of the bank guarantee. In the present case, the bank undertook to the Appellant that it would pay the guaranteed amount on demand, subject to the overall amount stipulated in each of the three bank guarantees. It was not for the bank to determine as to whether the invocation of the bank guarantees was justified so long as the invocation was in terms of the bank guarantee. A demand once made would oblige the bank to pay under the terms of the bank guarantee. The State Bank of India correctly understood its legal obligations and paid over the amount to the Appellant. In this view of the matter and having regard to the terms of the bank guarantees, the principle of law which has been formulated by the Tribunal cannot be accepted as reflecting the correct legal position. It is evident that following the invocation of the bank guarantees, the Respondent itself addressed a communication on 20 September 2012 to the Member Secretary of the Appellant. The communication contains a specific reference to the invocation of the bank guarantees. That apart, it is evident from the material on the record that the Appellant had issued a notice to show cause to the Respondent to which the Respondent also submitted a response - The Appellant has invoked the bank guarantees issued by the Respondent because of the failure of the Respondent to discharge the obligations imposed upon it by the Task Force Committee on 26 August 2011. The Tribunal has erred in interfering with the invocation of the bank guarantees and in directing the Appellant to refund the amount of ₹ 25 lakhs covered by the three guarantees. While invoking the bank guarantees, the Appellant has clearly adverted to the fact that the status of compliance was reviewed in the Task Force Committee Meeting; and that the officials of the Appellant had inspected the industry and had observed certain violations. The invocation of the bank guarantees was therefore in terms of the conditions stipulated in the bank guarantees. The invocation of the bank guarantees was the subject matter of the present appeal - Appeal allowed.
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