Bank guarantee substitution dispute split the Supreme Court on whether a foreign bank guarantee could stand or require Indian bank replacement.

The article discusses a split view on whether a bank guarantee issued by a scheduled foreign bank could be substituted with a guarantee from a scheduled Indian bank, and whether the High Court's recall and review orders required interference. One view treated the original guarantee as a valid irrevocable guarantee from a scheduled bank carrying on business in India and considered the later substitution direction unjustified; on that view, the appeals would succeed. The other view treated the 12.02.2019 order and the parties' recorded offer as requiring a scheduled Indian bank guarantee, upheld the later clarification as correcting an inadvertent mistake, and found no basis to interfere with the recall and review orders; on that view, the special leave petitions would be dismissed. No majority determination was reached.

---

---

Issues: Whether the High Court was justified in directing substitution of a bank guarantee issued by a scheduled foreign bank with a guarantee from a scheduled Indian bank, and whether the dismissal of the recall and review applications called for interference.

Analysis: One view holds that the guarantee issued by ICBC was a legally valid irrevocable guarantee issued by a scheduled bank carrying on business in India, that no adverse material existed against the bank, and that the direction to replace it after compliance and expenditure was not justified. That view treats the expression used in the original order as sufficiently covering the guarantee furnished and holds that the later substitution direction ought not to have been made.

Conclusion: On this view, the appeals would be allowed and the directions requiring substitution of the guarantee would be set aside.

Issues: Whether the order dated 12.02.2019, read with the parties' offer recorded therein, required a bank guarantee from a scheduled Indian bank and whether the High Court could correct the later confusion through recall and review proceedings.

Analysis: The other view holds that the order of 12.02.2019 reflected the parties' offer for a scheduled Indian bank, that the later clarification merely corrected an inadvertent mistake, and that the appellant could not rely on the ambiguous wording after acting contrary to the recorded offer. That view further holds that the appeal against the recall order and the review petition did not warrant interference, especially in proceedings concerning an interim measure.

Conclusion: On this view, the special leave petitions would be dismissed.

Final Conclusion: The Bench recorded inability to agree, so no final majority determination was rendered and the matter was directed to be placed before the Chief Justice of India for appropriate directions.

---