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Venkat Iyer (CEO)     26 June 2020

Extension of expired bg

Can an expired BG with a clause 'the period of the guarantee should not exceed 36 months" be extended after its expiry.If yes under which rules or section of the IBA or any act be requested.Pl advice


Learning

 6 Replies

Dibsha Nanda   26 June 2020

Hi. Can you please provide some more facts about the Bank guarantee so that I can help you better?

Venkat Iyer (CEO)     26 June 2020

Hi,

The BG was issued as a guarantee by the Developer in terms of DA.The BG had a clause as informed.The BG now stands expired.The expiry was as of October 2019, which was noticed subsequently.We have requested the Developer to extend the validity till the issue of OC,which according to us should be around April 2021.The developer is reluctant to extend instead wants the BG to be released with no revalidation.If the BG is not validated we will be left with no surety.

What is the remedy & the clauses to be refered for safe revalidation.Pl advice

 


 

G.L.N. Prasad (Retired employee.)     27 June 2020

The BG terms and conditions are regulated by uniform format prepared by IBA /RBI and implemented by all commercial banks in India.   There should be a due date.  The stipulations impose a condition that the BG is not enforceable after the due date. Within the prescribed due date, the party in whose name guarantee was given by the bank should present original BG and demand for payment.   There is no such stipulation of extending or for some other relief after the stipulated date.   The BG dies a natural death.  Taking another fresh BG is the alternate.  As per IBA norms, after the expiry of BG, Bank should serve a registered notice to the institution in whose favor the BG was issued, informing them that as BG was not presented within stipulated due to date, they have reversed the entry and there is no such contractual obligations and may demand the return of BG.  There are umpteen judgments on the treatment of Bank Guarantes enforcement after the prescribed due date.  Please search on google.

P. Venu (Advocate)     27 June 2020

Why we should decipher BG, DC ................ etc, etc?

Venkat Iyer (CEO)     27 June 2020

We are concerned since we are the aggrieved party.Our redevelopment project is pending completion & is completed to the extent of 60 % by which period the BG with the conditional clause got expired.As per DA the validity of BG should be till all the members are given possession of their redeveloped flats The Developer has stopped release of rents for last 3 months & also pending earlier 3 months rents(as per the order of Hon HC,Mumbai, for which he is a contempt condidate).Further the developer is under Arbitrators obligation to adhere to all he clauses of DA.We are in a soup as all the Members are either Sr.Citizens or Widows. 

In view of the above pl advice the steps to be taken with the wrt the case laws/judgements,

1.on the Developer & 

2.with their Bankers 

Thanks & Regards,

Venkat Iyer

 

G.L.N. Prasad (Retired employee.)     27 June 2020

As far as the Bankers are concerned the law is very clear as Bank guarantee can not be enforced after stipulated due date. A request was also made to search judgments in google with key words 

Regarding action against developers, you have to contact local advocate and discuss with him present status vs. agreement terms and he is the best consultant.


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