Court Orders Cash Security Over Bank Guarantee, Emphasizing Government's Need for Tangible Security

The court set aside the bank guarantee requirement and ordered cash security instead, emphasizing the government's need for tangible security. The court highlighted its obligation to follow Supreme Court decisions and directed refund with legal interest if the writ petitioner prevails.

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Issues:
1. Stay of operation of an order passed by a judge.
2. Validity of directing furnishing of bank guarantee for securing an amount.
3. Interpretation of Supreme Court judgments regarding bank guarantees in interim orders.
4. Discretion of the court in granting interim orders.

Analysis:
1. The appellants sought a stay of an order passed by a judge restraining them from taking steps for levy, imposition, and collection of purchase tax. The judge directed furnishing of a bank guarantee for Rs. 50,000. The appellants argued that no action was taken against the assessment and demand notices issued earlier.
2. The appellants contended that the judge was not justified in directing a bank guarantee based on a Supreme Court case deprecating such orders for commercial benefit. However, the respondents argued that the judge appropriately exercised discretion considering the legal points involved and referred to other cases where bank guarantees were directed.
3. The respondents cited Supreme Court orders allowing bank guarantees in specific cases to counter the appellants' argument against the bank guarantee directed by the judge. They highlighted that the Supreme Court's observations in the Dunlop case did not restrict the court's discretion in granting interim orders.
4. The court acknowledged the criticism against the bank guarantee direction but emphasized being bound by Supreme Court determinations under Article 141 of the Constitution. The court set aside the bank guarantee requirement and ordered cash security instead, considering the government cannot run on bank guarantees. The court maintained the need for security and directed refund with legal interest if the writ petitioner succeeds.

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