Bank guarantee

This query is : Resolved

Khushboo Maheshwari (Querist)
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05 January 2015 Hi, need your opinion. We had auctioned the tolls on our one road stretch for one year 01.04.2013 to 31.03.2014 to contractor X. X had given us bank guarantee as security. Then we extended the contract and according X extended the bank guarantee till November 2014.

Now in November 2014, we again auctioned tolls (securitize) on same road stretch for one year December 2014 to November 2015. The contractor who won the bid is same X. Now he is saying that he will extend the earlier bank guarantee only. Is it valid? In case in future if we have to evoke the Bank Guarantee will the bank honour it. The Bank is ready to write that it is extension of 2013 bank guarantee and the work name is securitization. Won’t we require new bank guarantee as the contract is new.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 January 2015 If the extension of bank guarantee covers the new contract no problem obtain a confirmation from the bank, else obtain a new bank guarantee.
Normally bank guarantee contains a clause against which contract it was issued. If the clause is there obtain a fresh bank guarantee.

Khushboo Maheshwari

Khushboo Maheshwari (Querist)
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05 January 2015 The case here is when the Bank issued the Performance bank guarantee in 2013 then the name of the contract was "user fee collection". Now the contract name is "securitization of user fee". The bank is ready to issue an extension letter incorporating the name of contract as "securitization of user fee" but please note it is EXTENSION and neither AMENDMENT NOR NEW BANK GUARANTEE.

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 January 2015 Get an amendment to the bank guarantee including the new contract.