TaxTMI 
TaxTMI 
2019 (7) TMI 1866
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....hree bank guarantees issued to the Appellant and in directing the Appellant to refund the amounts covered by them to the Respondent. 4. The Respondent commenced its operations in 1995 for the manufacture and sale of instant coffee. It was granted consent under the Water (Prevention and Control of Pollution) Act 1974. On 6 August 2008, the Union Government amended the Environment (Protection) Rules, 1986 to specify discharge standards for the coffee industry. 5. Complaints were received by the Appellant and by the District Collector, Guntur in regard to the environmental pollution caused by the Appellant. A notice to show cause was issued by the Appellant to the Respondent on 2 August 2011. A Task Force Committee was constituted by the Appellant which, after hearing the Respondent, issued directions to it on 12 August 2011. Based on the recommendations of the Task Force Committee, the following directions were issued to the Respondent on 26 August 2011: Part A Improvement of existing system a. The industry shall submit the efficiency of the ETP for the treatment of effluents to the board standards. b. The Industry shall revamp the existing A....
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.... further undertook that: Notwithstanding anything contain herein: a) Our liability under this Bank Guarantee shall not exceed Rs. 5,00,000/- b) This Bank Guarantee shall be valid upto 06.09.2013. c) We are liable to pay the guaranteed amount any part thereof under this Bank Guarantee only and only if you serve upon us a written claim or demand on or before 06.09.2013 8. The second bank guarantee covered Part B of the stipulation which the Task Force Committee had required the Respondent to fulfill on 26 August 2011. The bank guarantee contained the following stipulations: In pursuance to the above, we M/S. CCL PRODUCTS (INDIA) LIMITED, Guarantee the observance and performance by the company of the various terms and obligations as provided in the commitment made above and undertake to pay to the Board subject to a maximum sum not exceeding Rs. 10,00,000/- (Rupees Ten lakhs only) on demand and in the event of company failing to comply with the above conditions/Directions. Out liability under the Guarantee is restricted to Rs. 10,00,000/- (Rupees Ten lakhs only). Our Guarantee shall remain in force until 06.09.2013, unless a sui....
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.... The Board officials inspected the industry on 21.07.2012 and 23.08.2012 and observed certain violations. In view of the non-compliance of the industry with the directions issued by the Board, it is decided to invoke the bank guarantee of Rs. 25 Lakhs in favour of the Board. The EE, RO, Guntur is directed to address the Bank to invoke Bank Guarantee of Rs. 25.0 lakhs in favour of the Board and obtain the amount by way of Demand Draft drawn in favour of the Member Secretary, A.P. Pollution Control Board, Hyderabad immediately. The original bank guarantee is to be returned to the Bank after obtaining the demand draft. In pursuance of the above communication, the bank guarantees were invoked on 12 September 2012 and the amount of Rs. 25,00,000 covered by three bank guarantees was paid over to the Appellant by the State Bank of India. 11. Aggrieved by the actions of the Appellant invoking the bank guarantees, the Respondent moved the Tribunal. 12. The Tribunal by its judgment dated 16 August 2016 held that the principles of natural justice were required to be followed prior to invoking the bank guarantees. Finding fault with the Appellant for failing to do so, t....
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....or of the bank guarantees indicate that they were not unconditional. It was urged that the bank guarantees were furnished to secure compliance with the specific obligations which were imposed upon the Respondent in Parts A, B and C of the Task Force Committee's recommendation dated 26 August 2011. In the present case, it was urged that the demand which was made to the State Bank of India was not in terms of the conditions specified in the bank guarantees. Second, it was urged that the Respondent has complied with the recommendations of the Task Force Committee and even at this stage, it would be appropriate if the Tribunal is called upon to verify compliance. Third, it was urged that the letter of invocation has emerged before this Court for the first time and had not been produced before the Tribunal. On these grounds, it was urged that the judgment of the Tribunal interfering with the invocation of the bank guarantees does not warrant interference. 16. At the outset, we must deal with the fundamental basis of the decision of the Tribunal in setting aside the invocation of the bank guarantee. The Tribunal held that the purpose of the bank guarantee was not commercial or ind....
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....uggested by Mr. Naphade, is to be accepted, it would also be open to a banker to put forward a case that absolute and unequivocal bank guarantee should be read as a conditional one having regard to circumstances attending thereto. It is, to our mind, impermissible in law. A bank guarantee constitutes an independent contract. In Hindustan Construction Co. Ltd. v. State of Bihar (1999) 8 SCC 436, a two judge Bench of this Court formulated the condition upon which the invocation of the bank guarantee depends in the following terms: 9. What is important, therefore, is that the bank guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished. The terms of the bank guarantee are, therefore, extremely material. Since the bank guarantee represents an independent contract between the bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the....