SC: Bank guarantee must be honoured

LEGAL DIGEST

The Supreme Court has dismissed the appeal of Vinitec Electronics Ltd against the Delhi High Court judgment in its dispute with HCL Infosystems Ltd over the invocation of bank guarantee given by Vinitec to HCL. According to the agreement between the two companies, HCL had agreed to buy UPS systems from Vinitec. Later, disputes arose over the payment. Vinitec argued that HCL was not entitled to invoke the bank guarantee without paying the balance due. The Supreme Court emphasised that a bank guarantee must be honoured if there was no fraud or irretrievable injustice. In this case, there was neither, the court pointed out. Moreover, the arbitral tribunal was hearing the dispute over the bank guarantee. Therefore, the court dismissed the appeal without expressing any opinion on the entitlement.

Builder's case dismissed

The SC has dismissed the appeal of Rahul Builders against the Madhya Pradesh HC judgment in the dispute between the builder and Arihant Fertilisers & Chemicals over a bounced cheque drawn on Federal Bank of Indore. Arihant had issued a cheque for Rs 1 lakh in favour of the builder. It was not honoured as the bank stated that the account had been closed. Therefore, the builder issued the purported notice under Section 138 of the Negotiable Instruments Act. Arihant resisted the case in the magistrate's court stating that the notice was not valid as it had claimed not Rs 1 lakh but Rs 8.72 lakh on other counts also. When the criminal proceedings went on, Arihant moved the HC which quashed the case. On appeal, the SC upheld the HC view and stated that the demand in the notice was not for the particular cheque amount. Therefore, the notice was not valid.

Empire jute case sent to arbitration

The SC has used its extraordinary powers under Article 142 of the Constitution to refer the dispute between Empire Jute Co Ltd and the Jute Corporation of India to arbitration. The dispute was over the carrying cost claimed by the company and violation of the terms of the contract between the two parties.

SC on equal pay for equal work

"The principle of equal pay for equal work has gone a sea change," the Supreme Court stated while setting aside the judgment of the Punjab and Haryana Chigh Court directing the government to pay wages to its daily wage drivers equal to that of the regular employees. The judgment explained: "Earlier the view of this court was that if two persons are discharging the same functions, they will be entitled to the same wages. Subsequently, this view has been changed and now the view is that there should be complete and total identity between the two persons similarly situated so as to grant equal pay for equal work."