Is invocation of the Bank Guarantee during the claim period valid invocation and binding on the Bank?

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT

THE HONOURABLE MR.JUSTICE N.NAGARESH

MONDAY, THE 26TH DAY OF APRIL 2021 / 6TH VAISAKHA, 1943

WP(C).No.22760 OF 2019(T)

PETITIONER:

COCHIN PORT TRUST,
REPRESENTED BY ITS CHIEF ENGINEER,
WILLINGTON ISLAND,
COCHIN, ERNAKULAM-682 009
BY ADVS.
SRI.M.GOPIKRISHNAN NAMBIAR
SRI.K.JOHN MATHAI
SRI.JOSON MANAVALAN
SRI.KURYAN THOMAS
SRI.PAULOSE C. ABRAHAM

RESPONDENTS:

1 BANK OF INDIA,
DADAR (WEST) BRANCH,
294,S.K. BOLE RAOD,
NR.PROTUGESE CHURCH,
DADAR (WEST),MUMBAI,
MAHARASTRA-400028

2 M/S. SHRIKHANDE CONSULTANTS PVT. LTD.,
33-35,SHANTI CENTRE, 3RD FLOOR,
PLOT NO.8, SECTOR 17,
VASHI, NAVI MUMBAI,
MUMBAI, MAHARASTRA-400 705

R1 BY ADV. SRI.J.HARIKUMAR
R2 BY ADV. SRI.K.K.VIJAYAN
R2 BY ADV. SRI.G.RANJU MOHAN
R2 BY ADV. SRI.K.R.RAJESHKUMAR
R2 BY ADV. SRI.B.VINOTH

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-04-2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

J U D G M E N T

Dated this the 26th day of April, 2021

The petitioner–Cochin Port Trust is aggrieved by the refusal of the 1st respondent to encash Bank Guarantee and transfer the same to the petitioner. The petitioner also seeks to declare that invocation of the Bank Guarantee during the claim period is valid invocation and binding on the Bank.

2. The petitioner states that a tender was floated by them for awarding the work of providing consultancy services for design and supervision of flyover and ROB at ICTT area in Vallarpadam. The 2nd respondent being the successful bidder, Ext.P1 agreement dated 20.08.2014 was executed with the 2nd respondent. The 2nd respondent was required to provide a performance security in the form of a Bank Guarantee. The 2nd respondent furnished Ext.P2 Bank Guarantee dated 21.07.2014.

3. By Ext.P2, the 1st respondent-Bank agreed to pay the petitioner on demand any and all money payable by the 2nd respondent to the extent of `19,40,000/- at any time up to 30.09.2015. The Bank Guarantee which was valid up to 30.09.2015 was extended as per Ext.P3, up to 30.09.2016. In Ext.P3, it was stipulated that though the period of Bank Guarantee is up to 30.09.2016, the claim period is up to one year after the expiry of the validity of the Bank Guarantee i.e., up to 30.09.2017. The Bank Guarantee was extended from time to time on same conditions. The final extension as per Ext.P8, was up to 31.03.2019 with claim period up to
31.03.2020.

4. Certain defects were noticed in the work of the 2nd respondent and the 2nd respondent was instructed to inspect the site and suggest appropriate remedial measures. The 1st respondent-Bank was informed on 06.06.2019 to return the Bank Guarantee amount until further communication is received from the petitioner. As the 2nd respondent did not initiate remedial measures even within a period of one month, the petitioner invoked the Bank Guarantee on 28.06.2019, 29.06.2019 and 01.07.2019, as per Exts.P10 to P12.

5. By Ext.P13 dated 06.07.2019, the 1st respondent informed the petitioner that the Bank Guarantee cannot be paid as the guarantee period has lapsed and only claim period is remaining. The petitioner contends that refusal of the 1st respondent to honour the Bank Guarantee is illegal and in violation of the conditions of the Bank Guarantee.

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