A bank guarantee is an independent contract, and its invocation must comply with its terms; disputes regarding underlying agreements should be resolved in civil court.

ORDER :

Surepalli Nanda, J.

1. Heard learned senior counsel Sri S.Ravi, appearing on behalf of the Petitioner, the learned counsel Smt. V. Dyumani appearing on behalf of 1st Respondent and learned senior designate counsel Sri D.V.Sitaram Murthy, representing Sri A.Chandra Shaker, learned counsel appearing on behalf of the 2nd Respondent.

2. The petitioner approached the court seeking prayer as under:

"...to issue a Writ of Mandamus directing the Respondent No. 1 not to encash/allow fraudulent invocation of the subject Bank Guarantees mentioned in para 51 of the present writ petition by the Respondent No.2 including under Letter of Invocation dated 09.10.2023..."

3. PERUSED THE RECORD :

a) The counter affidavit filed by the 1st Respondent, in particular, Paras 4, 5 and 6, read as under :

"4. It is humbly submitted that the Petitioner has been in the line of activity Electrical Contractor and has been availing the credit facilities from the Respondent 1 since 2017 and the said credit facilities has been renewed/enhanced from time to time. At the request of the petitioner the Respondent bank sanctioned the following credit facilities subject to the terms and conditions mentioned in the sanction letter dated 15.02.2022 under Sole Banking.

5. It is submitted that the Respondent Bank has sanctioned the Credit Facility to the Petitioner in the normal course of the Banking Law and Practise. It is the contention of the Petitioner that Respondent No.2 has not supplied the material and Respondent No.2 is fraudulently trying to encash the Bank Guarantees issued by this Respondent No. 1 at the instances of the Petitioner to Respondent No.2. It is submitted that in view of the orders dated 05/10/2023 passed by the Hon'ble Court in WP 27689 of 2023, the Respondent Bank "directed not to take any coercive steps against the petitioner and/or guarantors and from degrading the account of the petitioner to NPA". As per the norms of the bank if an account has been classified as NPA only, Vigilance Dept. & Recovery Dept. Corporate Office will order Forensic Audit to find out the reasons to slip the account as NPA and also to determine the Fraud Angle and initiate appropriate proceedings.

6. It is submitted that for invocation of the Bank Guarantee that there shall be a liability on the part of the Petitioner. Since the petitioner is alleging that the Respondent No.2 has not supplied the material for which the Bank Guarantees were obtained, it is the incumbent of the part of the Respondent No.2, that the material has been supplied to the Petitioner which is a precondition in between the petitioner and Respondent No.2 to invoke the Bank Guarantees issued by the Respondent No.1 in favour of the Respondent No.2. It is submitted the matter requires a detailed enquiry to find out whether the material is supplied by the Respondent No.2 and whether the BGs are invoked in respect of the liability that has arisen out of the material supplied by the Respondent No.2 to the Petitioner."

b) The counter affidavit filed on behalf of 2nd Respondent, in particular, Para 16 (IV), (VI), (VIII), Para 18 (C) and (D), read as under :

"16.IV. In reply to the averments made in para no.5, it is submitted that the averments that the this vacate stay petitioner/Respondent No. 2 is a company incorporated under the provisions of the Companies Act 2013 having its registered office as mentioned in the cause title and is engaged in the business of providing online service inter alia relating to B2B sale of raw materials, such as building and construction, mild steel, stainless steel, steel scrap and metallics, ferrous/non-ferrous scrap are matter of record and facts as such needs no specific reply. It is submitted that the group company namely OXYZO is in the Business of Financing, a fact conveniently ignored by the Petitioner with an intention to mislead this Hon'ble Court.

VI. The averments made in para no.7 that in the month of January 2021, the vacate stay petitioner represented to the