Safiya Malik

The High Court of Judicature at Bombay, Division Bench of Justice M.S. Sonak and Justice Jitendra Jain, delivered an oral judgment dismissing a petition filed by the Commissioner of Customs. The Court held that no relief could be granted in respect of bank guarantees which had expired more than a decade earlier, as no written claim had been lodged within their validity period. The Bench recorded that the petition was instituted almost ten years after the expiry of the guarantees and concluded that the relief sought was untenable in law. Consequently, the Court dismissed the petition without passing any order as to costs.

The matter concerned a writ petition filed by the Commissioner of Customs seeking enforcement of four bank guarantees issued by the Bank of India. The substantive relief sought was a writ of mandamus directing the respondent Bank to pay a total sum of Rs. 1,95,41,000 secured under the said bank guarantees. The petitioner argued that the guarantees were continuing in nature and could not be revoked during their currency without the consent of the Commissioner of Customs. It was further contended that the Bank should be treated as a personal guarantor in the matter.

Also Read: Place Of Exclusive Jurisdiction Deemed Seat Of Arbitration | Supreme Court Says Parties “Clearly Intended To Exclude All Other Courts”

Counsel for the petitioner, Ms. Maya Majumdar assisted by Ms. Akanksha Shukla, submitted that the wording of the bank guarantees made them continuing in nature, and therefore, enforceable despite the corporate insolvency resolution process (CIRP) involving the second respondent at whose instance the guarantees were furnished. She pointed out that though the petitioner’s claim during the CIRP was rejected on limitation grounds, the guarantees nonetheless imposed a personal obligation on the Bank, independent of the CIRP outcome.

The petitioner further argued that personal guarantees continue to subsist even after approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016. On this basis, it was urged that the Bank of India could not escape liability despite the CIRP proceedings against the second respondent.

In response, counsel for the first respondent Bank, Mr. Anant B. Shinde, contended that the guarantees in question expired on 31 May 2011. He stated that no claim had been lodged within the validity period, which was an explicit requirement under the terms of the guarantee. The Bank argued that the guarantees had long since lapsed, and the petitioner’s subsequent attempt to enforce them after a period of nearly ten years was legally misconceived. It was submitted that since the claim had already been raised during the CIRP and rejected, and the rejection was never challenged further, the petitioner could not now seek to revive the claim through a writ petition.

The Bench recorded that the relevant bank guarantees contained two critical clauses. The first clause provided that the guarantees were continuing in nature and could not be revoked during their currency without the consent of the Commissioner of Customs. The second clause, however, stated that the guarantees would stand discharged unless a written claim was lodged with the Bank on or before 31 May 2011, irrespective of whether the original guarantee was returned.

The petitioner admitted that no claim was lodged within the stipulated time period. The record showed that the first written claim was lodged only in 2018, nearly seven years after expiry of the guarantees. Even assuming the Bank had extended the guarantees for two additional years till 2013, no demand was made within that period either.

The Court further noted that the petitioner had raised the same demand during CIRP proceedings but that claim was rejected for being time-barred. No appeal or challenge was preferred against the CIRP rejection order. It was also conceded by the petitioner’s counsel that the claim was lodged beyond the prescribed limitation period.

Thus, the central dispute revolved around whether the term “continuing guarantee” in the contract could override the express requirement of lodging a written claim within the validity period. The petitioner relied heavily on the language referring to a continuing guarantee, whereas the respondent Bank pointed to the non-obstante clause expressly limiting liability to claims lodged before expiry.

The Division Bench examined the rival submissions and scrutinized the contractual clauses of the bank guarantees. It recorded: "What is crucial here is the issue of revocation of the Bank Guarantee 'during its currency.' Admittedly, the Bank Guarantee was never revoked during its currency or even otherwise." The Court further stated: "No claim, whether in writing or otherwise, was lodged by the petitioner on or before 31 May 2011. Such a claim was lodged only in 2018, i.e., almost 7 years after the expiry of the Bank Guarantee and its renewal up to 2013."

The Court observed that the clauses must be interpreted in their entirety, noting: "Therefore, by merely emphasising the first quoted clause and the reference to the expression 'continuing guarantee' within it, the relief sought belatedly cannot be granted." It explained that the argument overlooked the significance of the subsequent clause which began with a non-obstante clause and required a claim to be lodged within the validity period.

The Bench clarified the position of law: "In the absence of any written claim within the validity period of the bank guarantee, the Petitioner cannot now belatedly seek the enforcement of the guarantee by instituting this petition." It further recorded: "The argument that a personal guarantee survives the CIRP does not apply in the present case because the guarantee had expired even before the CIRP."

The Court also considered the maintainability of the writ petition itself. It observed: "Ordinarily, no writ petitions are entertained for such purposes. However, Ms. Majumdar submitted that since the Bank is a State under Article 12 of the Constitution, we should entertain this petition." Nevertheless, it held that even if the petition was entertained, no relief could be granted in light of the express contractual terms.

The Bench stated the effect of the non-obstante clause in the guarantee: "The Bank's liability would arise only if a written claim was lodged with the Bank on or before 31 May 2011. No such claim was, admittedly, lodged. Lodging a claim almost 7 years after the Bank Guarantee had expired did not, in the circumstances of the present case, oblige the Bank to honour the Bank Guarantee."

Also Read: Allahabad HC Slams Spoils System In Counsel Appointments | Merit Not Inheritance Must Guide State Corporations | Rule Of Law Cannot Be Compromised By Nepotism

Following the conclusion of arguments, counsel for the petitioner attempted to contend that the guarantees had been extended till 2013. The Court noted this submission but held: "Assuming this is correct, still, admittedly, no demand or claim in writing was made up to 2013. Therefore, even based on this belated submission, our conclusion remains the same."

The Division Bench concluded its judgment with a categorical rejection of the petition. It stated: "For the above reasons, we see no merit in this petition and dismiss the same without any order for costs." The Court upheld its findings that no claim was made during the validity period, that the guarantees had expired long before the institution of the petition, and that the relief sought could not be granted through a writ petition.

The Bench further clarified that even on the petitioner’s final submission regarding extension of the guarantees till 2013, the position remained unchanged as no written claim had been made even within that extended period. Consequently, the petition stood dismissed, with no relief or costs awarded.

Advocates Representing the Parties

For the Petitioner: Ms. Maya Majumdar, Advocate assisted by Ms. Akanksha Shukla, Advocate

For the Respondents: Mr. Anant B. Shinde, Advocate

Case Title: Commissioners of Customs (Export) v. Bank of India & Anr.

Neutral Citation: 2025: BHC-OS:12859-DB

Case Number: Writ Petition No. 620 of 2021

Bench: Justice M.S. Sonak, Justice Jitendra Jain