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Exception 3 to Section 28 of the Indian Contract Act
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Exception 3 - Saving of Bank Guarantee Contracts
This exception provides that the general prohibition under Section 28 of the Contract Act, which renders certain contracts illegal if they restrain legal proceedings, does not apply to bank guarantees issued by financial institutions or banks. Specifically, it allows the enforceability of bank guarantees even if they contain clauses that restrict legal actions or proceedings related to the guarantee.
References: Cochin Port Trust, Rep. by its Chief Engineer VS Bank of India, Dadar (West) Branch, Mumbai - Kerala, Larsen & Toubro Limited VS Punjab National Bank - Delhi, COCHIN PORT TRUST vs BANK OF INDIA - Kerala, Jayacharan Barman VS Oriental Insurance Company Ltd. - Gauhati, Chaitanya Energy Private Limited VS Indian Bank - Telangana, M/S NHDPL SOUTH PRIVATE LIMITED vs UNION BANK OF INDIA - Karnataka -
Analysis and Conclusion
Exception 3 effectively creates an immunity for bank guarantees from the general restrictions imposed by Section 28, recognizing their independent contractual nature. Courts have reiterated that bank guarantees are standalone contracts, enforceable despite restrictions on legal proceedings, provided they comply with the exception's conditions. This exception was introduced through the Banking Laws Amendment Act, 2012, and is significant in cases involving the invocation and enforceability of bank guarantees, especially when disputes arise regarding their validity or the restrictions embedded within them.
References: Jayacharan Barman VS Oriental Insurance Company Ltd. - Gauhati, Chaitanya Energy Private Limited VS Indian Bank - Telangana, COCHIN PORT TRUST vs BANK OF INDIA - Kerala
Search Results for "Exception 3 to Section 28 of the Contract Act"
2021 0 Supreme(Ker) 277 • India - Kerala
N.NAGARESH
3 to Section 28 of Contract Act is intended for extinguishment of rights or discharge of any party from any liability under a Bank ... Indian Contract Act - Section 28 - Banking Laws Amendment Act, 2012 - Tender - Work for Design and supervision ... lodged on or before - Written demand of petitioner is admittedly after said date - Extended period of claim provided for under Exception ... The exten....
2021 0 Supreme(Del) 446 • India - Delhi
JAYANT NATH
As noted above, Section 28 of Contract Act does not deal with the said claim period. ... Indian Contract Act, 1872 - Section 28 - Limitation Act, 1963 - Agreements in restraint of legal proceedings ... 28 of Contract Act. ... Thereafter, Exception 3 to section 28 of the Contract was added in....
2023 0 Supreme(HP) 327 • India - Himachal Pradesh
SATYEN VAIDYA
Arbitration and Conciliation Act, 1996 - Section 34, 28 (3), 31(3) - Contract - Arbitral award - Patent ... illegality - Petitioner has taken exception to award by filing objections under Section 34 of Arbitration and Conciliation Act, 1996 ... Petitioner has taken exception to aforesaid award by filing objections under Section 34 of the Arbitration and Conciliation Act, 1996 (fo....
![Jayanta Khaund VS Assam Power Distribution Company Limited [APDCL]](https://supremetoday-s3.b-cdn.net/Gauhati_small_2.png)
2024 0 Supreme(Gau) 85 • India - Gauhati
MANISH CHOUDHURY
39) ... ... (B) Bank Guarantees - Nature and enforceability - The court reiterated that a bank guarantee is an independent contract ... the invocation of three bank guarantees by the Assam Power Distribution Company Limited (APDCL) due to alleged non-fulfillment of contract ... unconditional nature of the bank guarantees allowed for their invocation despite the petitioner’s claims of non-fulfillment of contract ... The learned Single Judge of the Hon’ble Delhi High Court after considering the history of the amendments carried out in #HL....
2024 0 Supreme(Telangana) 1022 • India - Telangana
SUREPALLI NANDA
6, 10, 26) ... ... (B) Legal Principles - A bank guarantee is an independent contract ... (A) Banking Regulation Act, 1949 - Invocation of Bank Guarantees - The petitioner sought a Writ of Mandamus to prevent the encashment ... This period, it is stated, is statutorily governed by section 28(b) read with Exception 3 to section 28 of the Contract Act. In the absence of any such clause in the guarantee, the said pe....
2021 Supreme(Online)(KER) 7564 • India - Kerala
The extended claim period is in terms of Exception 3 to Section 28 of the Contract Act. ... Exception 3 to Section 28 of the Contract Act reads as follows: “Exception 3 - Saving of a guarantee agreement of a bank or a financial institution - This section shall not render illegal a contract in ... The 1st resp....
2025 Supreme(Online)(KAR) 6669 • India - IN THE HIGH COURT OF KARNATAKA AT BENGALURU
MR JUSTICE SURAJ GOVINDARAJ, J
Section 138 of the Negotiable Instruments Act and as such would satisfy the requirement of the contract between the parties, making the invocation valid. 7.10.
2008 0 Supreme(Del) 1197 • India - Delhi
A.K.SIKRI, MANMOHAN SINGH
OUSTER PROVISION - Arbitration Agreement - Arbitration and Conciliation Act 1996 - Section 35, Section 36 Fact of the Case ... Ratio Decidendi: The court emphasized that parties cannot contract out of a statute, and an agreement excluding the provisions ... Issues: The main issue was the effect of the ouster provision on the award and its enforceability under Section 36 of the ... time being as to references to arbitration. 3 Though under exception 1 of Se....
2024 0 Supreme(Gau) 1795 • India - Gauhati
MANISH CHOUDHURY
17, 18) ... ... (B) Writ Jurisdiction - The court emphasized that it can intervene when authorities act ... Exception 3 to Section 28 has been inserted in the Indian Contract Act, 1872 by the Banking Laws [Amendment] Act, 2012 w.e.f. 18.01.2013. Thus, the provisions of Exception 3 to Section 28 is not applicable to the case in hand. 16.5. ... 16.3. In this co....
• India - Tripura
Contract Act, Section 43(3) of the AC Act has lost its efficacy. ... For determination of the present lis, Exception 3 of Section 28 of the Contract Act, as has short) and Section 28 of the Contract Act, more particularly, on p style= ... & Section 28(b).
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