SEA BLUE SHIPYARD LTD, vs STATE BANK OF INDIA

The petitioner is before this Court seeking extension of a

bank guarantee which has been issued by the 1st and 2nd

respondents in favour of the 3rd respondent. The bank

guarantee is issued specifically with respect to the

construction and supply of Ro-Ro-barge which contract was

awarded by the 3rd respondent to the petitioner.

The learned Senior Counsel appearing for the

petitioner submits that the work is almost completed and the

barge would be ready for delivery within two months. The

petitioner has also applied for extension of two months before

the 3rd respondent. In the meanwhile the bank guarantees

expire on 30.7.2017 and 3.8.2017. In the circumstance of the

bank guarantee expiring and the contract having not been

fully satisfied the 3rd respondent would invoke the same, in

which event the grant of further two months time would also

be put in jeopardy.

The learned Counsel for the respondent/Bank on

instruction submits that already SARFAESI proceedings have

been initiated against the petitioner for recovery of about

Rupees Fourteen Crores from the cash credit facility availed by

the petitioner and defaulted. The existing fund based facility

comes to a total of Rs.11.97 crores which has been defaulted

and interest has further accrued on the same. The non-fund

based facility being a letter of credit of Rupees Three crores

and the bank guarantees totaling Rupees Ten crores also have

been issued in favour of the petitioner. The bank guarantees

cannot be renewed since the other loans are said to be

defaulted and proceedings initiated.

The learned Counsel for the 3rd respondent was

directed to get instructions, which has been placed before me.

It is submitted by the 3rd respondent that the bank guarantees

were furnished against release of supply order and advance

payments to the petitioners of more than half the total

contracted amount has already been made. It is also

submitted by the 3rd respondent that the petitioner has not

met the supply order obligations, as on day, and has requested

for extension of delivery period. For considering extension of

delivery period as a pre-requisite, the bank guarantees should

also be extended. The Bank however is unwilling to extend the

bank guarantees.

The learned Senior Counsel submits that the total

dues as stated by the Bank of Rupees Fourteen Crores, is only

on a recall of the facilities granted to the petitioner. In fact the

defaulted amounts could be cleared by satisfaction of the

arrears which would be less than Rupees two crores. It is

undertaken that the entire amounts due from the 2nd

respondent, which is more than Rupees two crores would be

paid to the respondent/Bank.

In such circumstances, it is directed that the

respondents 1 and 2 consider the extension of the bank

guarantees for a further period of two months taking into

consideration all these aspects and also the fact that otherwise the petitioner would also not be able to satisfy the contract, if

the further time sought for is declined by the NPOL. This is a fit

case where the bank should take into account the over all

consideration of not putting a entrepreneur into total jeopardy

by re-calling a loan at a crucial juncture of a contract. In such

circumstances, the respondent/Bank shall consider the issue

immediately and issue a communication to the 3rd respondent.

The petitioner shall also file an undertaking before

the respondent/Bank that the entire amount received from the

3rd respondent would be paid to the 1st and 2nd respondents,

which if made a condition, the 3rd respondent shall comply with

that, on a communication being issued from the 1st and 2nd

respondents.

The Writ Petition is disposed of with the above directions.