Invoation of Bank Guarantee
sushil bhatt
(Querist) 21 April 2011
This query is : Resolved
Respected Members,
I solicit your valuable inputs on the following: -
We have engaged a party as supplier for some equipment for our client. In pursuant to the contract, the party has issued a bank guarantee (BG) for an agreed amount. Due to non performance we invoked the BG subsequently. However, in the meantime, the party has got an injunction in their favour restraining us from invoking the BG and the bank accordinngly refused to pay the money.
The stay was continued for a long period, however, finaly we succeded in Supreme Court and got the stay vacated but without a reasoned order.
We then send a letter to the bank and advised the bank to release the money under the BG alongwith interest w.e.f. the date of invocation. Accordingly, the Bank released the money but without interest.
Our query is that whether the Bank is liable to pay interest or not?
If yes, then what would be the best course of action to recover the interest from the Bank.
Any supportive judgement of any court on this issues would help us, if any.
BALAJI S N
(Expert) 22 April 2011
Dear Sushil,
In response to your query, Bank is liable pay the interest from the date of Court Order.
Further, whether the jugedment speaks about the interest for BG? if so you can still claim the same.
The rate of interest applicability from the date of invoke or from the date of court order, you may refer the court order.
with regards
BALAJI
BA LLB (CS)
sushil bhatt
(Querist) 22 April 2011
Sir, there is no order as to interest part in any of the court orders including Supreme Court order.
The bank refused to pay due to the party has got the injunction which continued for approx 24 months like 15 months in lower court, 6 months in High Court and then 2-3 months in Supreme Court. In that event, is the bank liable for interest from the date of invocation till the date of actual payment.
Any supportive judgement on this issue by Appex Court?
malipeddi jaggarao
(Expert) 23 April 2011
The delay in payment is due to the Bank's actions, but actions of the supplier who brought injunction before payment of the guarantee before the guarantee is invoked. Bank is rightful in its action of with-holding the payment till the stay is vacated and instructions of the court are received by it. Any payment of interest should in accordance with the court order and when the court has not awarded any interest, Bank is right in releasing the guarantee amount.
M V Gupta
(Expert) 23 April 2011
You are not entitled to calim any interest as proposed by you. The delay is on account of the stay order and not on account of any defualt on the part of the bank.
