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KrishnaRao (Construction)     08 April 2011

Expired Bank Guarantee - denial of Bank to discharge

My Bank Guarantee has been expired on 10.10.2008. It was given as a performance gurantee in favor of Municipal Commissioner, LB Nagar against the contract awarded. The contract was terminated in March 2010. I have a dispute with the departement. I have given a legal notice to that extent. I have asked the Department to  give back the BG originail as it it is expired and no use for them. They have not responded. I have approached the Bank to discharge my BG. They have asked for Original BG. I have informed that is not necessary as the BG is already expired long back. They have told that it is certain that we will not invoke the BG after expire date; but dicharge the BG original BG is required; that is the Bank Rule. Anyy body advise in this context. Is there any such rule either in Banking Laws or in legal paralance?



 13 Replies

Isaac Gabriel (Advocate)     08 April 2011

Alternatively, you can indemnify against the expired BG

KrishnaRao (Construction)     09 April 2011

Indemnifying is not a problem. We have already told. But the Bank is not ready to release the FIxed deposit given as security for the BG, even after BG expiry.

V. VASUDEVAN (LEGAL COUNSEL)     09 April 2011

The precise terms of the Bank Guarantee are required to have clear perspective and proper advice. You may either reproduce the releavant clauses or approacha lawyer, producing the whole set of documents. Certain Bank guarantees may have an irrevocable clause against specific obligations.

Vasudevan

Narendra Sharma (Consultant)     09 May 2011

 

Write some letters to Bank, then make a complaint at following address:

The Directorate of Public Grievances:
The condition is that at present the dispute should not be pending before any Court, Consumer Forum etc. (It is clarified that the Banking Ombudsman is not a Court for this purpose.)

ADDRESS for sending by Post/Courier:

The Cabinet Secretariat (Public Grievances), 2nd Floor, Sardar Patel Bhawan, Sansad Marg, New Delhi-110001. (For further details, please visit www.dpg.bharatsarkar.nic.in)

Mohan Fatehpuria (Director)     19 June 2011

Usually a guarantee bond contains a bank clause meaning:

  " Notwithstanding anything contained herein:

a.       Our liability under this bank guarantee shall not exceed Rs. _______ (Rupees ____only)

b.       This bank guarantee shall be valid upto ____________; and

c.     Unless a demand or claim is made on us in writing on or before ________ to pay the guaranteed amount or any part thereof under this bank guarantee, all your rights herewith shall be forfeited and we shall be relieved and discharged of all our liabilities thereafter."

A BG with a clause as above (or similar) & validity having expired and no written notice for claim having been served by the beneficiary, the bank is no longer authorized to entertain any claim from the beneficiary against expired bank guarantee.

Upon your serving the issuing bank a written notice to close the expired BG and refund the margin money, the bank is required to send a written notice to the beneficiary asking them to return the expired original bond.  If the original bond is not returned by the beneficiary after a lapse of 30 days, the issuing bank is required to cancel the BG and return the margin money without any further delay as RBI guidelines 

rani (student)     26 September 2011

could anyone please tell me if there is any decision by a court or any circular by the RBI which says that once the bank guarantee is revoked, the original bank guarantee should be submitted to the bank. I could not find this case anywhere, but I heard there is one such case.

i would also like to know whether the clause in a bank guarantee limiting the liability of the bank for a certain period is violative of Art 28 of the contract act.

rani (student)     26 September 2011

from the reply given by Mr.Mohan Fatehpuria, I get to know that there is a RBI guideline which states that If the original bond is not returned by the beneficiary after a lapse of 30 days, the issuing bank is required to cancel the BG and return the margin money without any further delay. I could not find the said guideline. So could you please telll me which guideline is it?

Mohan Fatehpuria (Director)     27 September 2011

The below link to a PDF file, the contents of which refers to - "Master Circular - Guarantees issued by RBI to all UCBs" is attached.   Page 6 of this PDF file lays down clear procedure for closure of expired BG. It is also affirmed here that such a closure is not voilative of section28 of the Indian Contrcat Act. However the referred Master Circular of RBI at RBI a website needs to be explored - if you find the same helpful please:

 https://www.spandane.com/books/Training%20Notes%20for%20Bank%20Staff/General%20Ledger/02-BankGuarantee.pdf

devendra (Manager)     13 October 2011

Hi,

I have one query relating to stamp duty. We also take Bank guarantee. The BG are issued in various state and store in mumbai. My query is what is the stamp duty applicable?

Does storing in MUmbai attracts provisions of mumbai stamp Act?

Yogesh Nagpure (Lawyer)     01 April 2013

Hello

I have issued the performance bank guarantee in favour of a company for a contract awarded to me by the said company.

The bank guantees were expired and been closed by the issuing bank. The margine maney and deposites against the bank guarantees are returned back to me on closure.

Now after three months of closure of my bank guarantee, the said guarantees are invoked by the bank to the company. The Bank have entered an entry in my cash credit account.

Kindly anybody let me Know what action can be taken against Bank.

Arun (Director)     23 March 2014

Mr. Rao,  you are well within your rights to ask your bankers for release of your margin money deposited with the bank against un invoked bank guarantee after its expiry date, even if the original bank guarantee is not returned  to your bankers by the beneficery of the BG. As per orders passed by Hon;ble High court of Delhi, your bank is bound to return your margin time deposited by you against your BG, on the expiry of the Bank guarantee, if not invoked by the beneficiery during the currency of the validity of the BG.

Arun Gupta

98-104-46385

Ajit Bhatt   16 July 2015

Our bank is not granting refund of margin money , earlier given at the time of issue of bank guarantee inspite of Guarantee piriod and cliam period has expired long back. Insisting for return of Original Bank Guarantee. - Pl. furnish RBI directives to the Commercial Banks in this regards

Shilpa Godase   25 April 2016

Can a bank renew a guarantee after the date of expiry. I have received a bank guarantee from a vendor. The bank has renewed the BG 3 weeks after its date of expiry.


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