26 February 2010
ON THE REQUEST OF A PRIVATE COMPANY HIS BANKER(A NATIONALISED BANK) HAS GIVEN A BANK GUARANTEE UNDER ITS AUTHORITY AND SEAL TO THE SUPPLIER OF THE PRIVATE COMPANY.BUT BY MISTAKE THE STAMP PAPER IS PURCHASED IN THE NAME OF THE PRIVATE COMPANY NOT IN THE NAME OF THE BANKER.
IS THE BANK GUARANTEE VALID IN LAW OR NOT?PLEASE CLARIFY WITH SECTION AND CASE LAW IF ANY.
26 February 2010
If the stamp paper is in the name of the company then the Bankers cannot issue guarantee in that stamp paper it is not a valid guarantee. Please refer stamp act of your state.
26 February 2010
The fact that the stamp paper is purchased by the private company should not invalidate the bank guarantee. Since in any case, the stamp duty charges would have been recovered by the bank from the private company. Moreover, the bank guarantee is issued by the bank at the instructions of the private company.
I request if Mr. Srinivasulu can give me reference of the relevant provision of any state stamp act to clarify my doubt.
26 February 2010
The Bank guarantee itself is not invalid as it is executed on a stamp paper. However, the stamp paper is not enforceable unless proper stamping is done. Therefore, the registrar of assurance will collect proper stamp duty from Bank + the penalty and the document becomes immediately enforceable. That is the position in the Stamp Act. You have a document that is basically not enforceable unless the duty + penalty is paid. In your case the duty is deemed to not have been paid as stamp paper is not in the name of either party to the guarantee (guarantor or indemnified)
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