Enforceability of counter guarantee and section 22 SICA defence fails after BIFR proceedings concluded.

A specific counter guarantee and later undertaking remained enforceable against the respondent for the amount paid under an unconditional bank guarantee, because they expressly kept the liability alive until the bank-beneficiary suit was finally decided. The broader BIFR settlement did not extinguish that contractual liability, as the securities released under the scheme were distinct from the guarantee-specific arrangements. The respondent's objection that it was not a party to the beneficiary's suit did not displace its indemnity obligation to the bank. A defence under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 also failed because the BIFR proceedings had already concluded after the company became net-worth positive.

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Issues: Whether the respondent was liable to furnish security in respect of the amount paid under the bank guarantee, and whether the defence based on alleged settlement and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 could defeat the claim.

Analysis: The counter guarantee and the later undertaking expressly provided that the respondent's liability in relation to the bank guarantee would continue until the suit between the bank and the beneficiary was finally decided. The subsequent arrangement under the BIFR scheme did not extinguish that liability, because the securities released by the bank were distinct from the specific counter guarantee and undertaking covering the disputed bank guarantee. The beneficiary's claim under the unconditional and irrevocable bank guarantee was adjudicated and paid, and the respondent's objection that it was not a party to that suit did not displace its contractual liability to indemnify the bank. The plea based on section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was rejected because the BIFR proceedings had already closed after the company became net-worth positive.

Conclusion: The respondent was held liable to furnish security for the amount paid under the bank guarantee, and the defence on settlement and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 failed.

Ratio Decidendi: A specific counter guarantee and undertaking remain enforceable according to their terms notwithstanding a broader settlement of dues, and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 does not bar recovery once BIFR proceedings have concluded.

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