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2020 (2) TMI 1680 - HC - Indian LawsRefusal to release the payment in terms of the unconditional guarantee - refusal on the ground that the money may not have been made available by Simplex to the bank - HELD THAT - IOCL says that it was in such circumstances that IOCL was constrained to invoke the writ jurisdiction of this court for a direction on the Bank of Baroda to release the payment under the unconditional bank guarantee. IOCL maintains that in such circumstances and considering the conduct of the Bank of Baroda, an appropriate order ought to have been passed to revoke its licence since it had acted in a manner unbecoming of a bank, a nationalised bank at that. The cross-objection is against such part of the order impugned dated June 24, 2019 by which the bank has been directed to immediately make the payment; but the Reserve Bank has not been required to look into the conduct of the Bank of Baroda to cancel its licence. Considering the conduct of the appellants, the Reserve Bank of India should consider what appropriate steps may be taken against the Bank of Baroda, including revoking its licence or the authority to carry on banking business, if necessary - Appeal dismissed.
Issues:
1. Invocation of bank guarantee by IOCL against Simplex Projects Limited. 2. Dispute regarding release of payment under the unconditional bank guarantee. 3. Allegations against Bank of Baroda's conduct and the request for revocation of its license. 4. Dismissal of the appeal due to the appellants' inability to proceed. Analysis: 1. The first issue involves the invocation of a bank guarantee by Indian Oil Corporation Limited (IOCL) against Simplex Projects Limited. IOCL entered into an agreement with Simplex in 2017 for work at the Bongaigaon facility. Despite IOCL issuing notices to Simplex and invoking the bank guarantee of about Rs.6.97 crore, Simplex failed to perform the work. Simplex initiated arbitration proceedings under the Arbitration and Conciliation Act, 1996, but the Delhi High Court upheld the unconditional nature of the bank guarantee. The appeal against this decision was withdrawn by June 1, 2018, leading to a dispute over the release of payment under the guarantee. 2. The second issue pertains to the disagreement over the release of payment under the unconditional bank guarantee. IOCL sought a direction from the court for Bank of Baroda to release the payment. Despite the court ordering the bank to make the payment immediately, the bank hesitated, citing concerns about funds from Simplex. IOCL believed that the bank's actions were unbecoming of a nationalized bank and requested the Reserve Bank of India to consider taking appropriate steps, including revoking the bank's license. 3. The third issue involves the allegations against the Bank of Baroda's conduct and the request for revocation of its license. IOCL contended that the bank's refusal to release the payment under the unconditional guarantee warranted severe action, such as revoking its license. The court upheld the order for immediate payment by the bank but did not direct the Reserve Bank to investigate the conduct of Bank of Baroda for possible license revocation. 4. The final issue concerns the dismissal of the appeal due to the appellants' inability to proceed. The court dismissed MAT 916 of 2019 for default, leading to the immediate consideration of a cross-objection by the first respondent in COT 55 of 2019. The appellants' failure to proceed with the appeal resulted in its dismissal, while COT 55 of 2019 succeeded partially in addressing the payment release dispute. Two other related cases were disposed of, and no costs were awarded.
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