Delhi High Court Issues Practice Directions Notifies Performa For Summons For Settlement Of Issues In Commercial Dispute

The Delhi High Court has issued practice directions in respect of bank guarantees required by the Court and has also notified the performa for 'Summons for Settlement of Issues in a Suit Relating to Commercial Dispute'.

The directions with regards to the bank guarantees are given as per the decision of the High Court dated 2nd June 2021 in the case of Ircon International Vs. Hindustan Construction Co. Ltd.

According to the directions, it has been stated that a clause of term shall be necessarily incorporated in every Bank Guarantee furnished by a party in the High Court for release of the amounts deposited.

"Such term shall be to the effect, that in case the Bank Guarantee is not renewed, at least ten days before the expiry of the Bank Guarantee, by the party at whose instance the Bank Guarantee has been furnished, the Bank shall, without any further demand by the beneficiary or reference to the party at whose instance the Bank Guarantee has been furnished, proceed to encash the Bank Guarantee and remit the amount thereunder to the beneficiary under the Bank Guarantee." It has been stated.

Furthermore, it has been directed thus:

"The Bank Guarantees, both at the time when they are initially furnished and even at the time of their renewal, be verified through video conferencing, unless one, or the other party- for good valid reasons, insists on production of authorized officer from the bank before the Court for the purpose of verification, which that party has to satisfy the Hon'ble Court /Registrar, by giving reasonable reasons for permitting the physical production of authorized/competent officer."

A division bench comprising of Justice Vipin Sanghi and Justice Jasmeet Singh had issued the directions after observing that Practice Directions are necessary to be issued' to plug any loophole in the matter of renewal of Bank Guarantees famished by the parties as a condition for reiease of amount in their favour, which may be deposited by the opposite party during the proceedings pendency in the Court.

The Court had made the following observations:

- Whenever Bank Guarantees are furnished by a party for release of the amounts deposited in Court, Bank Guarantees should also contain a tenn to the effect, that in case the Bank Guarantee is not renewed, at least ten days before the expiry of the Bank Guarantee, by the party at whose instance the Bank Guarantee has been furnished, the Bank shall, without any further demand by the beneficiary or reference to the party, at whose instance the Bank Guarantee has been furnished, proceed to encash the Bank Guarantee and remit the amount thereunder to the beneficiary under the Bank Guarantee.

- Incorporation of such a clause in the Bank Guarantee furnished by the Bank would obviate the problem caused by possible failure on the part of the Registry to list the matter before the Registrar two or four weeks before the expiry of the Bank Guarantee, as directed.

"We direct the Registry to incorporate the terms of this order into 'Practice Directions' and the same should be made aware to all the Registrars dealing with cases of acceptance of Bank Guarantees and renewal thereof." The Court had said.

Additionally, the Court has also notified the proforma for 'Summons for Settlement of Issues in a Suit Relating to Commercial Disputes' pursuant to the directions in the case of Mothers Pride Education Institution Pvt. Ltd versus Smt Shukla Sehgal dated 11th May 2021.

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