The Calcutta High Court was hearing a case filed by IOCL against the BoB as the bank did not release the payment with regards to a bank guarantee worth Rs 6.97 crore provided to it (IOCL) by Simplex Projects Ltd
The Calcutta High Court has directed the Reserve Bank of India (RBI) to contemplate taking suitable steps against the Bank of Baroda (BoB) such as cancelling its license for failing to honor a bank guarantee furnished by a third party to Indian Oil Corporation Ltd (IOCL).
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The two-judge division bench of Justice Sanjib Banerjee and Justice Kausik Chanda in the order on February 10 instructed the RBI to “consider the conduct of the appellants” and take into account “appropriate steps” that can be considered against the bank “including revoking its license or the authority to carry on banking business, if necessary.”
The court was hearing a case filed by IOCL against the BoB as the bank did not release the payment with regards to a bank guarantee worth Rs 6.97 crore provided to it (IOCL) by Simplex Projects Ltd.
What is the case?
IOCL informed the court that it had entered into an agreement with Simplex Projects Limited in 2017 for conducting certain work at the Bongaigaon facility of the oil marketing company in Assam. In order to carry out the work Simplex was required to furnish a bank guarantee on account of security deposit.
The BoB then provided an unconditional bank guarantee of around Rs 6.97 crore on behalf of Simplex. As stated in the order, Simplex did not honour the contract signed between it and the IOCL which issued several notices and ultimately invoked the bank guarantee.
