HC restrains Centre from encashing bank guarantee

delhi-high-courtThe Delhi High Court today stayed the Centre’s move to invoke the bank guarantee furnished by private firm Bhushan Steel Ltd in relation to de-allocation of a coal block in Chhattishgarh.

“The Union of India is restrained from invoking the bank guarantee till further orders. The petitioner (firm) is directed to keep alive the bank guarantee till further order of this court,” a bench of Justice Manmohan said.

Earlier, the court had said that prior to invocation of the bank guarantee, the Centre “shall give ten days prior written notice to the petitioner (private firm)”.

It had also granted the liberty to the firm to approach the court on receipt of a letter invoking the bank guarantee.

The private steel major today moved the court and said a letter, written on May 8, has been received and it said that the Centre proposes to encash the bank guarantee.

The firm has also alleged “the inter-ministerial group is not the competent authority to recommend invocation of bank guarantee as in the case of coal blocks, the Coal Controller is the only competent authority to invoke the bank guarantee.”

The Centre, however, has submitted, invocation of bank guarantees is “legal and proper as neither fraud nor irretrievable injustice has been pleaded in the petition.”

Earlier, the court had said that before the allocation of the coal block in favour of Chhattisgarh Mineral Development Corporation (CMDC), the private firm had entered into an agreement with CMDC.

“CMDC, in turn, had disclosed the said agreement to the central government and the central government had noted the said agreement while allocating the coal block. The documents on record also prima facie show that the bank guarantee has been furnished at the instance of the petitioner (Bhushan Steel),” the court had said.

“Prima facie, this court is of the opinion that the petitioner has a direct and substantial interest in the invocation of the bank guarantee…,” it had said.


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