2025 (8) TMI 514 - HC - Customs

Petition to Enforce Bank Guarantee Dismissed for Delay Beyond Validity Period Under Contract Terms

The HC dismissed the petition seeking enforcement of a bank guarantee nearly seven years after its expiry and renewal period. The petitioner failed to ... Continuation of bank guarantee despite the resolution plan being finalised under the Insolvency and Bankruptcy Code, 2016 - continuing guarantee or not - enforcement of bank guarantee after about 10 years from their expiry - HELD THAT:- Admittedly, no claim, whether in writing or otherwise, was lodged by the petitioner on or before 31 May 2011. Such a claim was lodged only in 2018, i.e., almost 7 years after the expiry of the Bank Guarantee and its renewal up to 2013. In the absence of any written claim within the validity period of the bank guarantee, the Petitioner cannot now belatedly seek the enforcement of the guarantee by instituting this petition. The clauses for the guarantee must be interpreted in their entirety. Therefore, by merely emphasising the first quoted clause and the reference to the expression “continuing guarantee” within it, the relief sought belatedly cannot be granted. The argument overlooks the other parts of that very clause and the subsequent clause, which begins with a non-obstante clause. It is satisfied that the petitioner is seeking to belatedly enforce a contract of Bank Guarantee. Ordinarily, no writ petitions are entertained for such purposes. There are no merits in the petition - petition dismissed. ISSUES: Whether a Bank Guarantee described as a 'continuing guarantee' that was not revoked during its currency can be enforced after its stated expiry date without a written claim lodged within the validity period.Whether the failure to lodge a written claim within the validity period of the Bank Guarantee precludes enforcement of the guarantee thereafter.Whether a personal guarantee by a Bank survives the completion of a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.Whether a writ petition under Article 226 of the Constitution is maintainable to enforce a Bank Guarantee against a Bank considered a 'State' under Article 12 of the Constitution. RULINGS / HOLDINGS: The Bank Guarantee, although described as a 'continuing guarantee,' includes a clause that limits the Bank's liability to claims lodged in writing on or before the expiry date, and since no such claim was lodged within the validity period, the guarantee cannot be enforced thereafter.The absence of a written claim within the validity period of the Bank Guarantee 'precludes the enforcement of the guarantee' and the Bank is 'released and discharged from all liabilities' under the guarantee.The argument that a personal guarantee survives the CIRP does not apply because the guarantee had expired prior to the CIRP, and no timely claim was made during its currency.Although ordinarily writ petitions are not entertained for enforcement of contracts such as Bank Guarantees, even if the Bank is considered a 'State' under Article 12, no relief can be granted where the contractual conditions for enforcement are not met. RATIONALE: The Court applied the contractual interpretation of the Bank Guarantee document, emphasizing the non obstante clause which restricts the Bank's liability to claims made in writing within the guarantee's validity period.The Court relied on the principle that a Bank Guarantee is a contract and must be enforced according to its terms, including limitation periods for claims.The Court noted that the claim was rejected during the CIRP due to limitation and was not challenged, reinforcing that limitation bars belated claims.The Court rejected the submission that personal guarantees survive CIRP where the guarantee itself had expired prior to CIRP initiation.The Court acknowledged the unusual nature of entertaining a writ petition for enforcement of a Bank Guarantee but found no basis to grant relief given the contractual and limitation bar.