3204192
Description
Mind Map by Rohit Beerapalli, updated more than 1 year ago
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Created by Rohit Beerapalli
over 9 years ago
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Bank Guarantee
- Absolute undertaking to pay an
amount, whenever demanded
by guarantee-holder.
- Independent of underlying transaction.
- Independent of underlying transaction.
- Maharashtra SEB v. Official Liquidator, Ernakulam
- A guarantee was submitted
on behalf of a supplier who
had deposited securities.
- The only condition was
a demand from the
board, which was met.
- Held that bank could
not be stopped from
paying, and then
reimbursing itself
from the securities.
- If enforcement would depend on
an inquiry, the purpose of a bank
guarantee would be defeated.
- If enforcement would depend on
an inquiry, the purpose of a bank
guarantee would be defeated.
- Held that bank could
not be stopped from
paying, and then
reimbursing itself
from the securities.
- The only condition was
a demand from the
board, which was met.
- A guarantee was submitted
on behalf of a supplier who
had deposited securities.
- Hindustan Steelworks
Construction Ltd. v.
Tarapore & Co.
- A bank guarantee is an
independent and distinct
contract between the
bank and the beneficiary.
- Not qualified by the
underlying transaction
and primary contract.
- Not qualified by the
underlying transaction
and primary contract.
- In case of unconditional
bank guarantee, liability
of bank is absolute.
- Not dependent on
dispute or proceeding
between beneficiary
and the other party.
- Not dependent on
dispute or proceeding
between beneficiary
and the other party.
- Commitments from banks
need to be honoured
without interference from
the courts.
- Courts interfere only in
exceptional cases, where
irretrievable injustice would be
done if guarantee was encashed.
- Example - Fraud
- ex turpi causa non oritur actio
- Fraud unravels all.
- Fraud unravels all.
- ex turpi causa non oritur actio
- Example - Fraud
- Courts interfere only in
exceptional cases, where
irretrievable injustice would be
done if guarantee was encashed.
- A bank guarantee is an
independent and distinct
contract between the
bank and the beneficiary.
- Itek Corporation v.
First National Bank of
Boston
- In order to claim the exception
because of fraud, evidence must
be clear about the fraud, and
the knowledge of the bank.
- It must be impossible for the guarantor to reimburse himself.
- Mere apprehension that the other party will not be able to pay is not enough.
- In order to claim the exception
because of fraud, evidence must
be clear about the fraud, and
the knowledge of the bank.
- Dai-Ichi Karkaria Ltd v. ONGC
- Law cannot allow a
guarantee to be claimed by
unscrupulous methods.
- Bank had used undue influence to make
petitioner drop conditions from bank
guarantee, the court did not allow
enforcement.
- Law cannot allow a
guarantee to be claimed by
unscrupulous methods.
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