2003 (1) TMI 531 - HC - Companies Law

Court orders enhancement of Bank Guarantee, sets aside tribunal decisions.

The Court set aside the decisions of the Debt Recovery Tribunal and Appellate Tribunal regarding the enhancement of a Bank Guarantee. The Bank ... Recovery of debts Issues:1. Interpretation of court orders regarding Bank Guarantee and appointment of Receiver.2. Decision of Debt Recovery Tribunal and Appellate Tribunal on Bank Guarantee enhancement.3. Equitable considerations in tribunal orders.4. Legal validity of tribunal orders and applicability of case law.5. Relief sought by the Bank and Respondents.Interpretation of Court Orders Regarding Bank Guarantee and Appointment of Receiver:The Petition challenged an order by the Debt Recovery Tribunal and Appellate Tribunal related to a Bank Guarantee issued in a suit. The Court initially did not appoint a Receiver as the Defendant agreed to provide a Bank Guarantee of Rs. 1.10 crores. The Court allowed for the enhancement of the Bank Guarantee after five years due to the pending suit. The Tribunal orders deviated from the Court's directions, leading to the Bank seeking relief through the Petition.Decision of Debt Recovery Tribunal and Appellate Tribunal on Bank Guarantee Enhancement:The Debt Recovery Tribunal allowed the debtor's application and rejected the Bank's request for Bank Guarantee enhancement. The Appellate Tribunal upheld this decision, emphasizing that the Bank did not request the Bank Guarantee initially, and it was the debtor's decision. The Bank argued that both tribunals erred in their decisions and sought the orders to be set aside.Equitable Considerations in Tribunal Orders:The Respondents defended the tribunal orders, stating they were equitable and considered the interests of both parties. They argued that the orders factored in subsequent developments and changing circumstances. The Respondents contended that setting aside the orders would prejudice them while confirming the orders would not harm the Bank.Legal Validity of Tribunal Orders and Applicability of Case Law:The Court found that both tribunals erred in their approach. The Bank was justified in requesting the enhancement of the Bank Guarantee as per the original court order. The Court deemed the debtor's application ill-conceived and ruled in favor of the Bank's request, setting aside the tribunal orders.Relief Sought by the Bank and Respondents:The Court allowed the Petition, quashed the tribunal orders, and directed the debtor to renew the Bank Guarantee of Rs. 1.10 crores until the suit's disposal. The debtor was instructed to provide an enhanced Bank Guarantee within eight weeks. The Respondents' request to stay the order was denied, and the Petition was allowed with no costs awarded.