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Delhi High Court restrains encashment / invocation of Bank Guarantees amidst COVID-19 pandemic

Updated: Nov 5, 2021

Order dated 17th April 2020

 

The Hon’ble Delhi High Court by way of an order dated 17th April 2020[1], restrained Indian Oil Corporation Limited (IOCL) from encashment of Bank Guarantees issued by M/s. Punj Lloyd Limited (PLL) as per their contractual terms. The said ad-interim order came to be passed by the Court in a writ petition filed by Ashwani Mehra, the Resolution Professional of PLL (i.e. the Petitioner) under Article 226 of the Constitution of India, seeking ‘issuance of appropriate writ, quashing and setting aside the actions of IOCL, who sought to invoke certain bank guarantees, which were submitted’ by PLL.


The Counsel appearing for the Resolution Professional of PLL cited before the Court, an instance concerning other bank guarantees between the present parties, invocation of which had been stayed by the National Company Law Tribunal (NCLT). The Counsel submitted that his client in fact intended to approach the NCLT seeking a similar stay in this case too. However, owing to the current scenario with regards to the COVID – 19 pandemic and the ongoing nationwide lockdown, he had been unable to do so. While citing various notices issued by NCLT regarding its non-functionality till 3rd May 2020, the Counsel clarified that he had approached the High Court in writ jurisdiction only upon being constrained by the unavoidable circumstances due to the present pandemic. He further clarified that he was not seeking any jurisdiction at this stage.


The Court noted that it had stayed the encashment of other bank guarantees between the same parties till the expiry of one week from 3rd May 2020 and had disposed of the concerned writ petition accordingly. While the Court was inclined to do so in the present case too, the Counsel for IOCL requested that the writ petition may not be disposed of, on the pretext that he desired to take instructions from his clients. Accordingly, the Court refrained from disposing of the present Petition.

However, the Court was pleased to grant an ad-interim order restraining the invocation of 7 bank guarantees (excluding the two bank guarantees that had already been invoked during the pendency of the Petition) till the next date of hearing. The Court issued notice to all the Respondents and adjourned the matter till 10th June 2020.

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[1] Ashwani Mehra v. Indian Oil Corporation & Ors, W.P. (C) 2971/2020 & CM APPL. 10310-12/2020, High Court of Delhi, Order dated 17.04.2020.

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