The Supreme Court today refused relief to Anil Ambani group-controlled Utility Energytech Engineers, which had sought to encash bank guarantee after default by its subcontractor Maytas Infrastruture in a highway expansion project.
ICICI Bank had given the performance guarantee for Maytas Infrastructure's highway project in Tamil Nadu and the Bombay High Court had last month given the bank time till June 18 to deposit the money it underwrote.
A bench headed by Justice Markandey Katju, without going into the merits of the impugned interim orders of the High Court of May 15 and May 21 this year, asked the High Court to hear the matter on June 8, the day it reopens after summer vacation.
It further clarified that the case would be heard by "the appropriate bench" of the High Court and no adjournments should be given to the parties on that date.
On May 15, the High Court had asked ICICI Bank to deposit Rs 20 crore with the court in one week towards the performance guarantee amount and later on May 21 gave the bank time till June 18.
Utility Energytech in its appeal said that the High Court was not justified in directing the bank to deposit the amount in the court rather than making payment directly to it as it was the beneficiary under the contract.
Stating that the bank had no locus-standi to seek extension of time for payment, the petition stated that "a bank is under an obligation under the bank guarantee to make payment upon demand without any protest or demur".
Utility Energytech senior counsel Mukul Rohtagi further said that the alleged controversies in the parent contract required serious trial which would take some time and to stop the payment on that pretext would amount to violating the terms of the bank guarantee.
Stating that the High Court was not justified in interfering with the encashment of the bank guarantee, the company said bank guarantee was an independent contract between the bank and the beneficiary and the courts should not interfere with "the important instrument of financial trade".
Utility Energytech had sub-contracted the project for expansion of NH68 to Maytas in February last year. However, the Ambani company said that in view of defaults and breaches committed by Maytas and after the Satyam fiasco it had terminated the contract with Maytas and invoked the mobilisation guarantee of around Rs 40 crore.
Maytas had then initiated arbitration proceedings alleging that land for the project was not acquired in time.
It had also sought a stay on execution of the performance guarantee, which was underwritten by ICICI.
