The Calcutta High Court has reportedly asked the Reserve Bank of India (RBI) to consider "appropriate steps" against Bank of Baroda (BoB), including cancelling its banking license, for delaying to honour a bank guarantee.
The court was hearing a case between Bank of Baroda and Indian Oil Corp (IOCL) on a bank guarantee issued to Simplex Projects and later invoked by the oil marketing company (OMC), reports suggested.The order said that IOCL had entered into an agreement with Simplex Projects in 2017 for undertaking work at the Bongaigaon facility of IOCL. For this, Simplex was required to provide a bank guarantee on account of security deposit. An unconditional bank guarantee was furnished by the lender on behalf of Simplex for about Rs 6.97 crore.
According to the order, when no work was forthcoming from Simplex, IOCL issued several notices and finally invoked the bank guarantee.
BoB still refused to release the payment in terms of the unconditional guarantee on the ground that the "money may not have been made available by Simplex to the bank". According to the order, IOCL then invoked the writ jurisdiction of the Calcutta high court for a direction on the BoB to release the payment under the unconditional bank guarantee.
BoB is a public sector bank. The Government of India held 71.60% in the bank as on 31 December 2019.
Shares of BoB fell 4.75% to end at Rs 82.25. The scrip fell 5.04% to hit the day's low at Rs 82, which is also a 52-week low for the scrip.
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