2024 (4) TMI 309 - HC - Customs

Writ Petition - Invoking and encashing a bank guarantee - Demerger of business - bank guarantee for fulfillment of the duty amount - whether there is any obligation/liability of the petitioner to extend the Bank Guarantee which was furnished by the petitioner in regard to the imports - HELD THAT - In our opinion, the jurisdiction of this Court under Article 226 of the Constitution is limited. We cannot delve on any issue in regard to the terms and conditions of the demerger and the inter se liability between the petitioner and respondent no. 2-KLL on the demerged business, including on the issues of the inter se liability on the imports in question, for which the bank guarantee was furnished. Equally there cannot be an exercise of jurisdiction to injunct the invocation of the bank guarantee, as it is a settled principle of law that the bank guarantee constitutes an independent contract between the bank and the party in whose favour the bank guarantee is furnished. An injunction restraining the invocation of the bank guarantee can be granted in appropriate proceedings dealing with such contractual issues. Such reliefs can be granted applying the well-settled principles which need to weigh with the Court in injuncting the invocation of a bank guarantee. Certainly in the present facts, it is difficult for a writ court to consider the issues on invocation of bank guarantee and to record a finding of fact in that regard inter se between the petitioner and KLL. Be that as it may, insofar the present proceedings are concerned, it appears that the adjudication proceedings now stands remanded to the Original Authority/ Assistant Commissioner, who is seized of the matter in pursuance of the order passed by the Appellate Authority, and who is now called upon to decide on the remanded issues including on the issue of the party required to furnish the bank guarantee. In such circumstances, in our opinion, it would be appropriate that in this regard we keep open all contentions of the parties, to be urged before the Assistant Commissioner/Original Authority, before whom the proceedings are pending including on the issue of extension of bank guarantee either by the petitioner or respondent no. 2-KLL. We may also observe that unless the Assistant Commissioner so decides, the bank guarantee needs to be renewed for a reasonable time. Thus, we dispose of this petition by the following order Let the bank guarantee in question be extended by the petitioner for a period of one month from today. Petition stands disposed of in the aforesaid terms.

Summary

Issues involved:
The petition involved issues related to the obligation to extend a bank guarantee, liability for duty payment, and the jurisdiction of the court under Article 226 of the Constitution of India.

Obligation to Extend Bank Guarantee:
The petitioner sought relief from invoking and encashing a bank guarantee issued in 2012 for INR 80 crores, contending that the liability to extend the guarantee was in question. The bank guarantee was initially furnished due to a request by the Ministry of Power, Government of India, and subsequent circumstances led to its extension multiple times. The petitioner argued that the liability for duty payment now rests with respondent no. 2, as the petitioner's business was demerged and taken over by Konkan LNG Limited. The Appellate Authority remanded the matter to the Original Authority to ascertain facts regarding the demerger and the bank guarantee, emphasizing the need for a fair decision considering the demerger details.

Jurisdiction of the Court under Article 226:
The High Court acknowledged its limited jurisdiction under Article 226, stating that it cannot delve into the terms of demerger or the inter se liability between the petitioner and respondent no. 2. The court highlighted that a bank guarantee constitutes an independent contract and cannot be easily restrained from invocation. It was emphasized that issues related to bank guarantee invocation should be dealt with in appropriate contractual proceedings, considering well-settled principles. The court directed the bank guarantee to be extended by the petitioner for one month and instructed the Assistant Commissioner to decide on the obligation of the party required to furnish or extend the bank guarantee within four weeks, keeping all contentions open for consideration.

Conclusion:
The High Court disposed of the petition by ordering the extension of the bank guarantee for one month and directing the Assistant Commissioner to hear both parties on the issue of furnishing or extending the bank guarantee. The court stressed the importance of timely resolution due to the age of the imports in question, while also allowing the Assistant Commissioner to decide the entire proceedings if deemed appropriate. No costs were awarded in this matter.