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Sethi Sohum (Entrepreneur)     18 December 2017

Bank guarantee // bank not removing lien from fd

We issued an Advance Bank Guarantee from HDFC Bank in Delhi against FD in favour of a Big corporate company against the receipt of Advance payment for the products to be supplied. The supplies have been made & the bank guarantee in original is returned to us by the beneficiary WITHOUT the discharge letter. The bank guarantee validity date is also expired.

We have submitted the original bank guarantee to the bank 6 months ago and have a receiving from them, stamped, but they handwrote that 'Received without discharge letter' on this receiving.

Now, after 6 months also, they are not removing the Lien from FD saying discharge letter is mandatory because there is an 'onerous clause' in the BG.

The point to which they are referring to the onerous clause in BG is:

"The Bank Guarantee cannot be cancelled by the supplier/contractor if the order is cancelled for any reason. Consequently the cancellation of the order will only be effective after the buyer/client issues a letter to ………………………………………..(Name and address of the bank)  instructing them to cancel the letter of guarantee and the same is acted upon by us."

But according to us, this above point is valid only if the Bank Guarantee was to be cancelled in the validity period, then discharge letter is required.

The beneficiary has flatly refused to provide any discharge letter whatsover no matter what.

What can I do to force the bank to cancel the BG & remove the lien on my FD.

I have so far been in touch with the branch & redressal office through e-mail only.

Also, there is no auto renewal clause.



 11 Replies

G.L.N. Prasad (Retired employee.)     19 December 2017

Immediately issue a Registered  notice demanding for removal of lien and warn them consequences including huge compensation.

Irrespective of return of original bank guarantee, the operation of BG cease to function even one day after prescribed date, as there is specific restrictive clause.  They might have reversed the entry in their books on the very next day and not showing this as contengent liability, but at the same time misleading applicant.

You have already delayed the issue.   There are number of DF decisions against the bank's such arbitrary actions.

Infact an applicant is not concerned with this process.  If they have doubts, they ought have written to beneficiary for seeking clarification, and even when it is objected by the beneficiary, the lien should be cancelled after the date.  This is the very purpose of introducing a restrictive clause in uniform bank guarantee formats by all banks.   If the Bank is defeating the very purpose and objective of such restrictive clause, it must be taken as delilberate harassment seeking huge compensation.


Also file this as Grievance in Banking ombudsman on line.  There is no such clause to retain such contractual obligation as per restrictive clause as falsely claimed by Bank.  The restrictive clause overrules all such small print conditions.   Issue notice to-day to Bank by Regd. post seeking for release of FD.  You can issue the notice as applicant yourself and there is no need for advocate.  Simple three sentences are enough.




1.At our request you have issued BG No....dt...........favouring ...........................(beneficiary) for .............monthsfor Rs...... and as per restrictive clause, the BG enforceability expires on........................

2.Original Bank guarantee was surrendered to Bank on....................

3.Inspite of such expiry of BG, and even after surrender of original BG to Bank on............, Bank has not releasead lien on FDR No.....................dt.............for Rs....and not providing any specific reasons as to the risks involved.   BG can not be encashed after....................and particularly when original BG was in custody and control of Bank duly surrendered.

4. Bank has collected Commission for issuing BG, and as such consideration was paid.  Nor  releasing lien on securities , particularly to the beneficiary is a serious deficiency of services and amounts to harassment of depositors.

Hence this notice is being issued for release of lien on above deposit with immediate effect, failing which the applicant may have to resort to legal action for delibereate harassment.





Invariably post the same as grievance in on line portal of the Bank as complaint (Just copy and paste)



1 Like

Sethi Sohum (Entrepreneur)     19 December 2017

Thank you very much Sh. G.L.N. Prasad Ji! Just the kind of guidance I was looking for. (I hope clicking the like button is the only available acknowledgement to thank the expert/member)

Sir, few queries:

1. "There are number of DF decisions against the bank's such arbitrary actions" - What is DF?

2. This letter is to be sent to the Bank Branch address to the Branch Manager via Speed Post - Acknowledgement Due? If I don't get any reply from them, I ve to approach the banking ombudsman within 30 days of sending this letter?

G.L.N. Prasad (Retired employee.)     19 December 2017

1.There is no cost involved in filing complaint with Baking ombudsman and it is free and available on line., so

a)first file the copy and paste complaint as grievance in on line portal of the bank,

b)Then, by making suitable modifications file on line complaint in Banking Ombudsman of your jurisidiction. There  is no prescsribed format and immediately after filing on line grievance to Ombudsman, send hard copies by Regd ack due under copy to concerned Bank.

2.That means in one envelope you enclose the original notice and also the copy of complaint filed before banking ombudsman with such filling of reference no.

3.The  DF referred to is District Consumer Forum of your district.  I still have my own doubts whether it can entertain the complaint or not as it depends on constitution of your trading activity.  However, making a try costs nothing as the complaint is one and the same both for DF and Ombudsman.  Use followin simple format and modify the title.


Complaint before Banking Ombudsman  or /Consumer Forum.



1.Name of the Complainant and address.

2.Name of the Bank /Opposite party (DF)

3.Brief facts:  a)Complainant has applied and secured Bank Guarantee for Rs.... favour of Rs........................and the duration of the BG is upto...

b)Bank has collected Commission of Rs........

c)Bank has taken Fixed deposit No.............for Rs.............fvg. as security for BG issuesd

d)Complainant has obtained the original Bank guarantee issued by the Bank and surrendered the same to Bank on................with acknowledgment (Encl 1) and has been requesting for release of lien on said fixed deposit for any amount is more precious for individual/trader.

e)Bank, even after receiving original BG is not releasing lien and has been harassing the complainant with out a valid reason.   In case of any doubts, to avoid such risks, Bank can write to the beneficiary and can obtain clarification.

f)Bank is neither obtaining such clarification from beneficiary about the non enforceability of the BG nor lifting lien and causing inconvenience and irreparable loss to complainant.   It is not clear as to whether Bank has reversed the contingent liability in books of accounts or not after receiving original BG issued by them in return as their record.

g)As Bank is subjecting complainant to harssment without any legal justification, this complaint.

4)PRAYER: Complainant prays  through this for directions / orders to Bank.

a)For  immediate lifting of lien on fixed deposit offered as security, as there is no obligation to them on behalf of applicant.

b)For awarding of costs of Rs.5,000/- for incidental expenses in getting back the Bank guarantee original and as applicant is disabled in liquidating the deposit to repay to his personal obligation towards loss of eligible interest on borrowing @ 18% on Rs.....

c)For awarding compensation of Rs.50,000/-  for subjecting complainant to harassment and withholding fixed deposit without any valid legal and justified reasons.

Verification: I,..............................s/o......................aged..................resident of.........................solemnly affirms and state that above facts are true to my knowledge and facts.  This complainant is filed as Bank is rejecting to lift the lien since....months.



1 Like

Sethi Sohum (Entrepreneur)     20 December 2017

Sir, I think your 1st notice is starting to work which I sent yesterday itself, received by them today.

The Bank today called to confirm that they will send someone from the bank physically to the beneficary's office & get the required approval, however, on asking by when the person from bank would be visitng my customer, they were very non commital about it.

You suggest to wait for a week or 2 before sending your complaint (as mentioned in your 2nd post in above thread)?

Thank you.

G.L.N. Prasad (Retired employee.)     20 December 2017

Do not stop.  Your remedy is not getting the FD lien lifted.  You have to get compensation with such interest also.  Do not spend one rupee.  Just always file on line or Regd pos ack due notices.  

All that formalities are not necessary at all, when your customer can never encash BG, as original was already returned to them.

Send another E Mail letter confirming the conversation, date, time, name of the official, and specifically inform them, that when original bank guarantee was already surrendered, these kinds of dramas of sending officials to beneficiary and getting confirmation from them etc were never known in any bank.  Ask them to communicate every thing in writing only.  

Now send the same grievance in pgportal  on line portal of Reserve bank of India.(Above format as it is but instead of Ombudsman write Reserve Bank of India, and instead of complainant write Grievance Holder:

1 Like

Sethi Sohum (Entrepreneur)     21 December 2017

Sir, ve receievd the following e-mail from the Nodal office, we did submit an indemnity bond to produce the discharge letter as our customer did not agree to add the text marked in blue in the BG, am I in deep trouble?

Dear Mr. Jain:
This is with reference to your e-mail dated December 09, 2017 addressed to the Nodal Officer regarding cancellation of Bank Guarantee.
At the outset, we regret the inconvenience caused to you in this regards.
In consideration as discussed with Unit Head of Trade Desk, we would like to inform you that since clause no. 3 of Bank Guarantee contains onerous clause which clearly defines that the subject BG would be cancelled with the written confirmation from the beneficiary and hence we require the discharge letter.
We would also like to bring it to your kind notice that during the time of BG issuance, Bank had advised on 14-Dec-2016 on changing the text in clause 3 by restricting this clause till tenure of BG (as in blue highlighted):
"The Bank Guarantee cannot be cancelled by the supplier/contractor if the order is cancelled for any reason. Consequently the cancellation of the order will only be effective after the buyer/client issues a letter to ………………………………………..(Name and address of the bank)  instructing them to cancel the letter of guarantee and the same is acted upon by us, or till the expiry of bank guarantee whichever is earlier.
But your office did not accept the changes, and submitted the indemnity for retaining the clause as it is.
Now to cancel the Bank Guarantee we require the written undertaking/discharge letter from beneficiary.
We trust that aforesaid clarifies. In case of any further clarifications you may write / call back to us.
Assuring you of our best services.
In line with our focus and commitment to Customer Service, we trust that this Grievance Redressal Cell has addressed your grievance in a fair and equitable manner and the issue has been resolved to your satisfaction. If you are not satisfied with the resolution, you may write to our Principal Nodal Officer, HDFC Bank Ltd., 5th Floor, tower B, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel (West), Mumbai 400013.
Warm Regards,
Customer Service Officer
Grievance Redressal Cell
HDFC Bank Ltd.

G.L.N. Prasad (Retired employee.)     21 December 2017

You have not properly understood the response.  They have treated your grievance closed and closed all further correspondence.  Immediately write to the authority whose address was provided to them.  Add the following.  Do not stop the correspondence.


The bank is misinterpreting the BG.  Cancellation is different from surrendering original bank guarantee.

I hope that experts in the forum will respond.

During the currency, BG can not be cancelled.

But in your case, you have performed your obligation and surrendered discharged original bank guarantee.

When the original instrument is surrendered, there can not be a liability at all.

My earlier reply is for waiting for response.  Now that they have come out with a response, if you believe you can take the guidance.

Further go through copy of BG on encashment or surrender and validity of BG and the conditions for such payment.  You will certainly find a clause that original BG has to be surrendered while demanding enforcement.

1 Like

G.L.N. Prasad (Retired employee.)     22 December 2017

All BG's must be issued only in uniform format prescribed by IBA/RBI with restrictive clause stating such date on which all rights specifically cease to exist if a demand is not made.

I am afraid that member is not coming out as to whether there is restrictive clause mentioning such exact date.

Irrespective of all this, when original Bank guarantee was returned, and when BG can be encashed only on production of BG, discharge across BG and then a request for such encashment, I do not know why bank is still adhering to their stand.

Cancellation is different.  Previously some banks have issued BG, when original was not returned or some litigation pending, Banks unilaterally cancelled the BG.  In this particular case the original BG has been surrendered back to the bank.

According to my knowledge there is no contractual obligation between the Bank and the third party in whose favour BG was issued.  Bank can not demand any such stipulation or impose any conditions to them.   Maximum, they may send a Regd Ack due stating that the original BG was surrendered by applicant, and as such the contingent liability stands discharged.  Wait for a reasonable period of 15 days and release the lien on security.


The important issue is not on BG but not on lifting lien on deposits which were offered as security.

Sethi Sohum (Entrepreneur)     19 January 2018

Sh. Ramesh Singh Ji,

You are saying that bank can retain the lien on FD for 1 year from the date of expiry of the BG in absence of the discharge/covering letter?

UPDATE on my case: Bank is not heeding to my e-mails or letters, I am yet to file a complaint with banking ombudsman which I am going to do within 2 days. Sorry for the late reply as I was busy with a medical emergency at my home.

Sethi Sohum (Entrepreneur)     19 January 2018


Need help with filing online complaint of with RBI Banking Ombudsman:

1. What should be account subcategory? Should it be Current or Fixed? The FD is issued from our Current a/c maintained with the same bank & the BG is issued from this FD.

2. What needs to be selected from this dropdown box under the 'Complaint Details > Category' 

1 Like


Dear Mr.Harsh Jain,
Any development of releasing lien on you FD. We are facing similar issue with HDFC

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