While clarifying that no writ can be entertained for seeking enforcement of a belated contract of guarantee, the Bombay High Court declined to grant direction for such enforcement and held that lodging a claim almost 7 years after the Bank Guarantee had expired did not oblige the Bank to honour the Bank Guarantee. Finding that no claim, whether in writing or otherwise, was lodged by the petitioner on or before 31 May 2011, and a belated claim was lodged only in 2018, the Court clarifies that the absence of any written claim within the validity period of the bank guarantee debars the petitioner from belatedly seeking enforcement of the guarantee by instituting writ under Article 226 of the Constitution.
Since the guarantee in the present case had expired even before the Corporate Insolvency Resolution Process (CIRP), the Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain rejected the argument that a personal guarantee survives the CIRP, and observed that the clauses for the guarantee must be interpreted in their entirety. The Bench added that mere emphasis on the first quoted clause and the reference to the expression “continuing guarantee” within it will not enable the petitioner to seek the relief belatedly.
Reference was made to the second clause of the ‘Bank Guarantee’, which commences with a non-obstante clause that the Bank shall be released and discharged from all liabilities “unless a written claim for payment under this guarantee is lodged with them in writing on or before May 31, 2011, irrespective of whether or not the original guarantee is returned to them”.
The observation came in reference to a bank guarantee, which is sought to be enforced after about 10 years from its expiry, by contending that personal guarantees continue despite the resolution plan being finalised under the Insolvency and Bankruptcy Code, 2016, and claiming that even though the second respondent, at whose request the bank guarantees were provided, has gone into CIRP and the petitioner’s claim during CIRP was rejected due to limitation, the petitioner can still pursue the reliefs, considering the wording of the Bank Guarantee and the fact that the Bank itself was the personal guarantor. This claim of the petitioner was opposed by the counsel for the respondent bank by submitting that the bank guarantees were never revoked during their currency, which eventually expired on May 31, 2011.
Appearances:
Advocates Maya Majumdar and Akanksha Shukla, for the Petitioner
Advocate Anant B. Shinde, for the Respondent