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Courts can interfere with encashment of Bank Guarantees under specific circumstances

In Kochi Salem Pipeline Pvt. Ltd. and Ors. v. Petroleum & Natural Gas Regulatory Board, the Hon'ble Appellate Tribunal for Electricity opined that unless there is fraud of beneficiary or irretrievable harm or injury, Courts are not to interfere with encashment of Bank Guarantees

Appellant No. 1 a Joint Venture Company formed for specific purpose of constituting, commissioning and operating Kochi-Coimbatore-Erode-Salem LPG Pipeline. A consortium of Appellant No. 2 ("Bharat Petroleum Corporation Ltd. - BPCL") and Appellant No. 3 ("Indian Oil Corporation Ltd.-IOCL") with Appellant No. 2 as lead partner has been selected by Respondent Board for grant of authorization for said Pipeline. Letter of Intent issued by Respondent-Board in term of which Appellant No. 2 was directed to submit Performance Bond/Bank. Pursuant thereto Respondent Board issued a Letter of Authorisation ("LOA"). One of conditions in said LOA was that, entity was required to submit a Financial Closure Report to Respondent Board within a period of 120 days from date of authorization under Regulation 10 of said Regulations. Appellant is aggrieved by impugned order of Respondent Board whereby it has encashed 25% of Performance Bank Guarantee by relying upon Regulation 16(1)(c)(i) of said Regulations on ground that, there has been a breach of authorization with respect to achievement of financial closure.

Article referred: http://roundup.manupatra.in/asp/content.aspx?issue=77&icat=1

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