Home Case Index All Cases Companies Law Companies Law + HC Companies Law - 2017 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (3) TMI 1060 - HC - Companies LawPerformance guarantee - bank guarantee status - Held that:- There is a clear demand because the contractor has been accused of not completing the work required under the contract. There are numerous deficiencies which are committed in performance of the contract. There is delay on the part of the contractor in performing it. The work already done is defective. Therefore, the contractor has failed to observe and perform the terms and conditions of the contract which has resulted in the first respondent suffering huge losses and damages in excess of ₹ 140 crores. That is why the bank is called upon to make payment of the full guarantee amount of ₹ 10 crore. We are of the firm opinion that the bank guarantee before us is unequivocal and unconditional. It is not a conditional bank guarantee and, therefore, the beneficiary has an unfettered right to invoke it. As a result of the above discussion, we find that the only two contentions raised before us by Mr. Chagla have no merit. Consequently, the appeal fails. It is, therefore, dismissed. In the circumstances, there shall be no order as to costs. We clarify that the disputes and differences proposed to be referred to arbitration shall be decided, uninfluenced by any tentative and prima facie findings in the impugned order and our order on this appeal. All contentions of both sides are expressly kept open. At this stage, Mr. Saraf prays for continuation of the ad-interim order dated 26th October, 2016, and which is continued till date. The request is opposed by the respondent No.1. The alternate contention also need not detain us. Given the wording which is clear and unambiguous this is an unconditional, unequivocal and irrevocable bank guarantee. It is not an indemnity for losses. It cannot be said to be conditional merely because one sentence of clause 3.1 employ the words “indemnify the losses”. Merely because it seeks to indemnify the losses under the contract and the first respondent has to raise a demand by alleging such losses, will not empower the second respondent-bank to question the demand or the contents of the letter of invocation. It cannot, in any manner, call upon the employer, namely, the first respondent to satisfy it about the quantum of the loss or the manner in which the same was suffered or whether that was indeed suffered at all. The demand by the first respondent and in terms of the above clauses is decisive. It has been so raised and by the letter of invocation dated 27th October, 2016. Once the demand is raised, the bank cannot question it. It is an unconditional performance guarantee in the form of a bank guarantee. The bank cannot call upon the employer to satisfy it as to how the appellant has failed to perform its terms and obligations under the parent contract. In the absence of any linking and of the above nature, even the alternate contention must fail. Having noted Mr. Saraf's request, we find that the bank guarantee is unequivocal and unconditional. Further, it is a bank guarantee as ruled by us. In such circumstances, as a independent obligation of the banker is flowing from the same, that cannot be interfered with. The request is, therefore, refused.
|