Bank Guarantee Which Expired Almost Ten Years Before CIRP Was Initiated, Cannot Be Enforced: Bombay High Court

The Bombay High Court stated that expired bank guarantee can't be enforced post CIRP (corporate insolvency resolution process). Justices M.S. Sonak and Jitendra Jain stated that, “The argument that a personal guarantee survives the CIRP does not apply in the case because the guarantee had expired even before the CIRP. During the validity period of the guarantee, admittedly, no claim was lodged by the department. This petition was instituted almost 10 years after the guarantee expired, and that too by instituting a writ petition, probably realising that a suit would be barred by limitation.” The Customs department has filed a petition directing the Bank of India to pay amount secured by it under 4 bank guarantees to them. The department argued that the bank/respondent at whose request the Bank Guarantees were provided, has gone into CIRP and the department's claim during CIRP was rejected due to limitation, the department can still pursue the reliefs, considering the wording of the Bank Guarantee and the fact that the Bank in this case was the personal guarantor. The bank contended that the Bank Guarantees expired on 31 May 2011. They were never revoked during their currency. There is no question of now raising any claim based upon expired Bank Guarantees. Such a claim was specifically raised during CIRP but was rejected. Such rejection was never challenged. The bench opined that admittedly, no claim, whether in writing or otherwise, was lodged by the department 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 department cannot now belatedly seek the enforcement of the guarantee by instituting this petition, added the bench. In view of the above, the bench dismissed the petition. Case Title: Commissioners of Customs (Export) v. Bank of India & Anr. Case Number: WRIT PETITION NO.620 OF 2021 Counsel for Petitioner/Department: Maya Majumdar a/w Akanksha Shukla Counsel for Respondent/Assessee: Anant B. ShindeClick Here To Read/Download The Order

Bank Guarantee Which Expired Almost Ten Years Before CIRP Was Initiated, Cannot Be Enforced: Bombay High Court

Mehak Dhiman

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