NDLI: Standard Chartered Bank Vs. Heavy Engineering Corporation Ltd. & Anr.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Banks/Banking – Bank guarantees
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Banks/Banking – Bank guarantees – Law relating to invocation of – By letter of intent dtd. 19.05.81, 1 st respondent placed order on the 2nd respondent for the complete design, supply of both indigenous and imported equipments, erection and commissioning of requisite civil and construction works of the Dankuni Coal Complex at Rs.21.10 crores – Two bank guarantees, dtd.16.02.83 and 29.08.84 amounting to Rs.71,35,100/- and Rs. 20,32,500/- furnished on behalf of the 2nd respondent by the appellant-Bank in favour of the 1st respondent – Memorandum of Agreement executed – In due course of time, the 2nd respondent failed to complete the supply of equipment and the other conditions of the letter of intent – 1st respondent demanded encashment of both the bank guarantees – Refused by the bank – Eventually, the 1 st respondent filed suit before the High Court of Calcutta for Rs.1,10,33,207.07/- with interest being the aggregate sum of both the bank guarantees – Dismissed – Division Bench passed decree for Rs.1,10,33,207.00/- with interest @ 8% p.a. – Held: Bank guarantee is an independent contract between bank and the beneficiary – Bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one – Dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence – However, exceptions to this Rule are when there is clear case of fraud, irretrievable injustice or special equities – Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee – In the instant case, guarantees were unconditional, specific in nature and limited in amount – Guarantee documents, as a whole and clause 2 in particular cover the advance paid by the 1st respondent by reason of any breach or failure by 2nd respondent in due performance of the contracts i.e. against the contract for supply of plant and equipment – On reading of letters exchanged by and between the 1st respondent and the appellant pertaining to invocation of the guarantees, the condition of the guarantees had been duly complied with – Once the demand was made in due compliance of bank guarantees, it was not open for the appellant to determine as to whether the invocation of the bank guarantee was justified – Standard Chartered Bank’s predecessor in interest, ANZ Grindlay’s Bank had opened fixed deposit of Rs.91,67,600/- on 18.05.01, which was lien marked to Heavy Engineering Corporation Ltd. (HEC) and is being held under the control of the Registry of the High Court of Calcutta – Current fixed deposit is valued at Rs. 2,32,69,129.71/- and the total liability under the impugned order as on date will be Rs.2,78,03,681.64/- – Registry of the High Court of Calcutta may release the money lying in the account in favour of the 1st respondent – It is for the appellant (judgment debtor) to settle and satisfy the decree impugned in the instant proceedings – Contract.
Judge	Hon'ble Mr. Justice Ajay Rastogi
Neutral Citation	2019 INSC 1405
Petitioner	Standard Chartered Bank
Respondent	Heavy Engineering Corporation Ltd. & Anr.
SCR	[2019] 15 S.C.R. 368
Judgement Date	2019-12-18
Case Number	9288

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