Calcutta HC asks RBI to take appropriate action against Bank of Baroda: Indian Oil Corp Ltd told the High Court that it had entered into an agreement with Simplex Projects Limited in 2017 for undertaking certain work at the Bongaigaon facility.
The Calcutta High Court directed the Reserve Bank of India (RBI) to take necessary actions against the Bank of Baroda. The necessary action may include cancelling its banking license, for delaying to honour a bank guarantee.
Why Calcutta HC asks RBI to take appropriate action against Bank of Baroda?
In a matter relating to the appeal by BoB against IOCL, the division bench took up cross – objection by IOCL. The bench had immediately dismissed the appeal of BoB for default, as appellants could not proceed with the matter.
The court noted that in the terms of such agreement, IOCL was to make a mobilisation advance against a bank guarantee. Simplex was also required to furnish a bank guarantee on account of security deposit.
An unconditional bank guarantee of about Rs. 6.97 crore was furnished by the lender on behalf of Simplex.
According to the order, as there was no forthcoming work from Simplex. IOCL issued several notices and finally invoked the bank guarantee.
The order reads, “It is submitted on behalf of IOCL that notwithstanding the bank having no right to stall immediate payment upon the invocation of an unconditional bank guarantee, the bank, in this case, sought some time.”
IOCL also claimed that Bank of Baroda must have informed Simplex about the invocation and the company immediately instituted proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court.
It said,” IOCL submits that despite Simplex failing to obtain any order in such proceedings and the Delhi High Court observing that the bank guarantee was unconditional and payment thereunder could not be avoided once the guarantee was invoked, an appeal was preferred which was withdrawn by or about June 1, 2018″.
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Bank of Baroda still refused to release the payment in terms of the unconditional guarantee. The term they showed was that the “money may not have been made available by Simplex to the bank”, the order added.
According to the order, after this IOCL invoked the writ jurisdiction of the Calcutta High Court for a direction to the Bank of Baroda to release the payment. The order also added that through another order dated 24 June, 2019 the court had directed the bank to pay immediately, while the regulator has not been required to look into the conduct of the Bank of Baroda. Therefore, the current appeal by IOCL was filed in the form of a cross objection, seeking directions to the RBI to take steps against Bank of Baroda.