Delhi High Court on Bank Guarantees during Covid
Delhi High Court on Bank Guarantees during Covid
Litigation News

[COVID-19] Delhi HC restrains IOCL from invoking/encashing bank guarantees furnished by Punj Lloyd Limited

Aditi Singh

The Delhi High Court has restrained Indian Oil Corporation Ltd from invoking and encashing bank guarantees furnished by Punj Lloyd Limited in connection with a contract for works at Haldia Refinery, West Bengal. (Ashwini Mehra vs IOCL & Ors)

The order was passed by a Single Judge Bench of Justice C Hari Shankar in petitions filed by the Resolution Professional of Punj Lloyd Limited (Petitioner).

The Petitioner had sought a direction to quash Indian Oil Corporation Limited (IOCL)'s move invoking certain bank guarantees which were submitted by the Petitioner, in accordance with the terms of the contract between Punj Lloyd Limited (PLL) and IOCL relating to the Haldia Refinery Project.

In the second Petition, directions to restrain enchashment were sought against another set of bank guarantees which were yet to be invoked by IOCL.

The Petitioner, at the outset, clarified that he was constrained to approach the High Court under Article 226 only because of certain unavoidable circumstances owing to the COVID-2019 pandemic.

It was submitted that the Petitioner intended to approach the NCLT for an injunction against IOCL with respect to the encashment/invocation of the bank guarantees. However, owing to the lockdown which is to continue till May 3, 2020 as of now, it was not in a position to do so.

The Court's attention was drawn to the notice issued by the NCLT, as per which the NCLT had restricted its functioning till May 3.

It was added that in terms of the directions issued by the NCLT for hearing unavoidable urgent matters, the Petitioner had addressed an email to the NCLT but is yet to receive any response.

It was thus constrained to move the High Court because IOCL, in the meantime, proceeded to invoke certain bank guarantees.

In these circumstances, the Petitioner sought a limited amnesty by way of an injunction against the IOCL, restraining it from encashing the bank guarantees, till the expiry of one week from the lifting of the lockdown which is in force till May 3, 2020.

Counsel for IOCL submitted that if the Court was inclined to grant any limited relief to the Petitioner with respect to the bank guarantees that had already been invoked, it ought to be clarified that such relief was only in view of the stalemate with respect to the Petitioner’s inability to move the NCLT.

It was stated the order should not be treated as an expression of opinion, even tentative, regarding the merits of the case or the entitlement of the Petitioner to any injunction against invocation or encashment of the bank guarantees.

In view of the submissions, the Court opined that with respect to the guarantees that had already been invoked, it was not necessary to keep the writ petition pending and it ought to be disposed of by granting limited relief to the Petitioner.

It accordingly ordered,

..till the expiry of period of one week from the lifting of the lockdown, imposed by the Central Government, consequent to COVID-2019 pandemic, the IOCL shall remain injuncted from encashing/invoking the aforesaid three bank guarantees..till the expiry of one week from the lifting of the lockdown imposed by the Central Government, which is presently in force till 3rd May, 2020.
Delhi High Court

It added the Court had not entered into the merits of the matter and no observation in this order should be treated as a reflection, even prima facie, regarding the merits of the case or the entitlement of the Petitioner to any injunction against invocation or encashment of the bank guarantees in question.

With respect to bank guarantees which were yet to be invoked by IOCL, the Court issued notice to the Respondents and adjourned hearing till June 10.

It, nonetheless, directed that there shall be an ad-interim injunction against IOCL, restraining it from encashing the bank guarantees which are yet to be invoked.

Senior Advocate Rajiv Nayar, instructed by AZB & Partners team Anindita Roychowdhury, Piyush Mishra, Vatsala Rai and Raghav Chadha represented the Petitioner.

Advocate V N Koura represented IOCL and Advocate Ankur Mittal represented the Banks.

Read the Orders:

Order dated 17.04.2020 in W.P (C) 2971 of 2020.pdf
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Order dated Apirl 17.pdf
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