Bombay High Court Dismisses Writ Petition to Enforce Bank Guarantees of Rs. 1.95 Crore

A writ petition was filed under Article 226 for a mandamus for the payment of Rs. 1,95,41,000/- standing surety under four bank guarantees. It was contended that the guarantees were standing in nature, non-revocable without departmental approval, and enforceable notwithstanding subsequent insolvency proceedings against the principal debtor.

The responding bank resisted the petition, citing that the guarantees were merely until 31 May 2011 and contained a provision that all liability stayed discharged unless a written notice was issued during this time. No such claim was made during the validity period. The first claim was raised only in 2018, almost seven years later. A similar demand raised during the corporate insolvency resolution process had also been rejected on limitation grounds and was never challenged further.

Central Issue: Whether the enforcement of the bank guarantees could be directed under writ jurisdiction when the guarantees had expired and no written claim was lodged within the stipulated period.

HC’s Decision:  The Court held that the guarantees had to be read as a whole. Although one clause referred to them as “continuing,” the subsequent non-obstante clause expressly provided that liability would cease unless a written claim was made on or before 31 May 2011. Since no claim was lodged within the validity period, the later demand was untenable.

It was further observed that writ jurisdiction is ordinarily not available for enforcing contractual rights. Even considering the same, the claim was barred as the guarantees had expired years earlier. The belated claim that the Bank Guarantee was extended for a period of 2 years, i.e., till 2013, still, admittedly, no demand or claim in writing was made till 2013.

Therefore, the writ petition was accordingly dismissed without any order as to costs.

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