9911796707
TMI Blog2004 (11) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited, the petitioner No. 1 had issued four Bank Guarantees in favour of the President of India through the Assistant Commissioner of Customs, Ahmedabad to guarantee payment of amounts to the respondents in the event of respondent No. 6 failing to abide by the terms and conditions of the relevant notification and licence as set out in the said guarantees, on the terms and conditions as set out in the said guarantees. The particulars of the said four bank guarantees are as follows :- 2.2 As per the clauses set out in the said Bank Guarantees, the petitioner No. 1 had undertaken to pay the amount of the respective guarantees against any loss or damage caused to or suffered by the Government by reason of the respondent No. 6 failing to comply with the terms of its license and the said notification. Further, the manner in which a demand was to be made for invocation and encashment of the said guarantee was also specifically and explicitly set out in Clause 2 of the said Guarantee. The petitioner No. 1 was required to pay the amount under the said guarantee without protest or demur only on a demand from the Government stating the amount claimed is due by way of loss or dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er letter dated 12.09.2003 to the Chairman of the petitioner No. 1 once again setting out some of the facts and referring to the previous purported invocations of the said guarantees and demanded for payments to be made thereunder. It was also stated in the said letter that if the amount was not paid by the petitioner No. 1, recovery action would be initiated without further notice and the petitioner No. 1 would be liable for all damages. The respondent authorities have also informed the petitioner No. 1 that if the payment was not made, they would refer the matter to the Reserve Bank of India and advise the field formations not to accept any bank guarantee of the petitioner No. 1 Bank in future. It was also stated that all bank guarantees already executed by the petitioner No. 1 Bank would be returned and the Importers/Exporters would be advised to execute fresh bank guarantees of other Banks. The petitioner No. 1 gave reply to the said letter of the respondent authorities on 26.09.2003 through its advocate and lodged its protest against the purported action of recovery as well as putting the petitioner No. 1 under black list. Despite the said reply from the advocate of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the petitioner No. 1 and no payment could, therefore, be made under the said bank guarantees. The bank guarantees in their terms, required that payment was to be made and could be made to the respondent authorities only on the letter of invocation specifically stating that the amount claimed was due by reason of loss or damage caused or suffered by the Government by reason of breach of the Importers/Exporters of any of the terms or conditions of the said licence and notification. It was only on such specific statements being made that the petitioner No. 1 became liable to pay under the said bank guarantees without demur or protest, and that such demand became conclusive as regards the amount due and payable by the bank under the said guarantees. The said guarantees were also issued to cover any loss or damage caused to or suffered by the Government by reason of failure of the respondent No. 6 to comply with the conditions contained in the said licence and notification. He has further submitted that in view of the absence of the said specific statement in the purported letter of invocation, the said purported invocation was illegal, invalid, not in terms of the said bank guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extinguished and forfeited and the petitioner No. 1 stood released and discharged from all liabilities under the said guarantees. The letters of demand for payment received by the petitioner No. 1 after 02.08.2003, therefore, even assuming while denying that the same or any of them were letters of invocation, would not entitle the respondent authorities to receive any payment from the petitioner No. 1 under the said guarantees. Mr. Vakil has further submitted that since no loss was payable by the petitioner No. 1, there was no question of the respondent authorities issuing a detention notice or initiating any action under Section 142(1) of the Customs Act, 1962 or taking any action as set out in public notice dated 15.10.2003. 7. Mr. Vakil has further submitted that the impugned detention notice and public notice and the action of the respondent authorities proceeded on the erroneous basis that the respondent authorities are entitled to take action against the petitioner No. 1 under Section 142(1) of the Customs Act, for alleged non-payment of amount under the said Bank guarantees. As a matter of fact, there is no provision in any of the said Bank Guarantees permitting the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, the office of the Commissioner of Customs, Ahmedabad had sent a report dated 04.04.2001 wherein duty liability and interest thereon upto 31.03.2001 was communicated to the Settlement Commission. Since the respondent No. 6 has not paid the amount as per its commitment before the Settlement Commission, the Settlement Commission vide its order dated 12.03.2004 remitted the case back to the adjudicating authority as if no application under Section 127B of the Act was made. He has further submitted that against the total liability of ₹ 1016.34 Lakhs, the bank guarantees were invoked for ₹ 1,06,31,153/-. 11. Mr. Malkan has further submitted that respondent No. 6 had been issued 15 Advance Licences, out of which in 5 Advance Licences, no import had been made. In remaining 10 licences, raw-material has been imported by the petitioners through Release Advise issued by them in favour of Mumbai Custom House and Public Bonded Warehouse, Gandhinagar. In case of these 10 licences, export obligation was required to be fulfilled by them, as per Notification Nos. 79/95 and 80/95 dated 31.03.1995. The respondent No. 6 was expected to submit its Export Obligation Discharge Certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er No. 1 Bank was not required to see or ask which condition of the licence was not followed by the licence holder once the respondent has the powers to invoke the Bank Guarantees and the letter of invocation issued by the respondent is sufficient for the petitioner Bank. 14. Mr. Malkan has further submitted that the detention notice dated 10.10.2003 issued by the respondent authorities under Clauses (a) and (b) of Section 142(1) of the Customs Act, 1962 is legal and in accordance with law in as much as the same was issued after sufficient opportunity and warning given to the Bank to remit the amount of Bank Guarantees. Instead of remitting the amount in Government account, the petitioner No. 1 Bank has raised certain false and frivolous disputes. The action of the petitioner No. 1 Bank, therefore, forced the respondent authorities to take action of detention under Section 142 of the Act. The public notice issued by the respondent authorities is also legal and proper and in accordance with law in as much as the conditions of the Bank Guarantees were breached by the Bank and it has not paid the guaranteed amount to the Government of India inspite of several reminders/letters issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any dispute raised by the company in any proceeding before any Court or Tribunal . The clause in the bank guarantee specifically provides that the demand made by the President of India shall be conclusive as regards amount due and payable by the bank under this guarantee and the liability under the guarantee is absolute and unequivocal. Therefore, the bank has no case to resist the encashment of the bank guarantee. The Court has further held that it is true that the bank guarantee has to be read in conjunction with the terms of the contract but when the bank guarantee itself is in absolute terms, the agreement between the company and the Govt. of India would be of no avail to the bank. 17. Based on the aforesaid judgment, Mr. Malkan has submitted that the terms of the bank guarantee in the case before the Hon'ble Supreme Court and the terms of the bank guarantees in the present case are almost same and similarly worded. The bank in question in both the cases is also same. In the case before the Hon'ble Supreme Court, the company failed to discharge its export obligation and the invocation of bank guarantee was held to be just and proper. Similarly, in the present case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant terms of the bank guarantees. Since all the four bank guarantees issued by the petitioner No. 1 Bank in respect of four different licenses are on identical terms and except the amount of bank guarantee as well as the license number, there is no material change in any of these four bank guarantees, the same are considered together. It is stated in the bank guarantees that the President of India, acting through the Assistant Commissioner of Customs, Bombay has agreed to grant the Core Healthcare Limited exemption in terms of Notification No. 79/95 and 80/95 both dated 31.03.1995 against the Import License in question for the import of the goods mentioned therein on the terms and conditions specified in the said notification and licence. It is further stated that M/s. Core Healthcare Limited has undertaken to produce evidence in respect of export obligation to be discharged against the said licence and notification within 30 days from the expiry of the export obligation period. It is also stated that M/s. Core Healthcare Limited has further unconditionally and irrevocably undertaken to pay an amount equal to the duty leviable on the goods cleared in terms of said notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys prior to the expiry of the guarantees, the entire amount guaranteed would become forthwith due and payable to the Government and the Bank shall pay the amount to the Government without any demur on their first demand. 21. The four bank guarantees in question were renewed upto 02.08.2003, since the matter was pending for Settlement Commission. However, the Settlement Commission vide final order dated 24.03.2003 has disposed of the cases in accordance with the provisions of the Customs Act, 1962 as if no application under Section 127B of the Act was ever made and returned the cases to the proper Officer. The petitioner No. 1 Bank was, therefore, requested vide letter dated 10.07.2003 to invoke the Bank Guarantees and remit the Government account as per the condition laid down in para 4 of the Guarantees while invoking the Bank Guarantees. It was specifically stated that since export obligation period has already elapsed and the respondent No. 6 has not submitted the evidence of export obligations, in respect of the four Advance Licences, the conditions of the notification and Licences have not been fulfilled by the respondent No. 6. 22. The main dispute raised by Mr. Vakil i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence. In absence of any evidence of export obligations produced by the respondent No. 6 till the Bank Guarantees were invoked, it is difficult to believe that the respondent No. 6 has discharged its export obligation and if the export obligation is not discharged, in that case, the respondent No. 6 is liable to pay duty on the goods cleared under exemption in terms of notification and the Advance Licence and since the Bank has unconditionally and irrevocably undertaken to pay the Government against any loss or damage caused to or suffered by the Government by reason of failure on the part of the respondent No. 6 of any of the terms and conditions contained in the said Licence and notification including export obligation mentioned therein, the petitioner No. 1 Bank is not justified in raising the dispute that the Bank Guarantee is not invoked in a manner laid down in the Bank Guarantee. Even otherwise, the Hon'ble Supreme Court has made it clear in the case of DAEWOO MOTORS INDIA LTD. V. UNION OF INDIA AND ORS. reported in that the words 'by reason of non-fulfilment of the export obligation under the above said Notification' cannot be read in isolation by dissociating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, not just and proper for the Respondent No. 6 to contend that the loss or damage caused or suffered by the respondent authorities is much less than the amount demanded by invoking the Bank Guarantees. Reference made to the registration of cases by BIFR is also wholly irrelevant and uncalled for as far as invocation of Bank Guarantees are concerned. 25. As far as the issuance of notice under Section 142(1) of the Customs Act and the public notice which according to Mr. Vakil amounts to black listing of the petitioner No. 1 Bank are concerned, we are of the view that since the petitioner No. 1 Bank has not obliged the respondent authorities by remitting the amount of the Bank Guarantees when they were invoked as per the terms of the Bank Guarantees, the respondent authorities are quite justified in enforcing the recovery by resorting to the provisions contained in Section 142(1) of the Customs Act. Before issuance of the public notice, the respondent authorities have made it clear vide their letter dated 12.09.2003 wherein it is specifically stated that if the due amount is not received within stipulated time, the department will initiate recovery action without further not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Supreme Court has given its decision even on merits also. Since the above finding of the Delhi High Court has not been upturned by the Hon'ble Supreme Court, we are also in agreement with the said finding of the Delhi High Court and are of the view that the present petition is liable to be dismissed even on the ground that it involves disputed questions of facts. Even otherwise, the law regarding invocation of Bank Guarantee is very settled and unless there is fraud or irretrievable injustice, the Court should not grant any injunction against invocation of Bank Guarantees. No such allegation is made in the present case. 27. Before concluding this judgment, we observe that the decision of the respondent authorities not to accept the Bank Guarantees which are issued or to be issued by the petitioner No. 1 Bank shall remain in operation till the amounts claimed by them under the Bank Guarantees in question are not paid by the petitioner No. 1 Bank. Once the said amounts will be paid, the ban imposed by the respondent authorities would automatically be lifted. 28. With these observations and directions, the petition is dismissed without any order as to costs. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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