In the case of Bank of Baroda &Anr. Vs. Indian Oil Corporation Limited & Ors.,the Calcutta High Court asked the Reserve Bank of India (RBI) to consider “appropriate steps" against Bank of Baroda (BoB) which includes revocation of its license or authority to carry on with banking business, if necessary, for failing to honour a bank guarantee given by a third party to Indian Oil Corporation (IOCL) and its disorderly conduct in dealing with payment against an unconditional bank guarantee. The case between Bank of Baroda and Indian Oil Corp Ltd (IOCL) was on a bank guarantee issued to Simplex Projects Ltd. and later invoked by the oil marketing company (OMC).
The division bench comprising Justice Sanjib Banerjee and Justice Kausik Chanda directed,
"Considering the conduct of the appellants, the Reserve Bank of India should consider what appropriate steps may be taken against the Bank of Baroda, including revoking its license or the authority to carry on banking business, if necessary."
FACTS OF THE CASE
IOCL entered into an agreement with Simplex Projects in 2017 for undertaking work at the Bongaigaon facility of IOCL for which simplex had to provide a bank guarantee on account of the security deposit. Bank of Baroda furnished a guarantee on behalf of Simplex for approximately 6.97 Cr.
IOCL issued several notices as Simplex was not working properly, after which it finally invoked the bank guarantee. Bank of Baroda took time to pay the amount whereas it was supposed to pay it immediately. Further, IOCL also claimed that BoB informed Simplex about the invocation and the company initiated proceedings under Section 9 of the Arbitration and Conciliation Act,1996, before the Delhi High Court. Simplex failed to obtain any order in such proceedings. The Delhi HC observed that the bank guarantee was unconditional and payment could not be avoided once the guarantee was invoked. An appeal was preferred for which was withdrawn by or about June 1, 2018. However, BoB still refused to release the payment stating that simplex did not pay the amount to the bank.
WHAT WAS IOCL’s NEXT MOVE?
IOCL then invoked the writ jurisdiction of the Calcutta HC and requested the court to order to BoB release the payment under the bank guarantee. Furthermore, it requested the court to take action against BoB because of its unfair actions.