Home Legal NewsRecent Development Delhi HC dismisses Petition asking to refrain Central Government from invoking bank guarantee in connection with a mining project in Maharashtra

Delhi HC dismisses Petition asking to refrain Central Government from invoking bank guarantee in connection with a mining project in Maharashtra

by Shreya

Single Judge Bench of Justice Suresh Kumar Kait   rejecting concerns of COVID-19 lockdown,  dismissed a petition of a thermal and green power firm seeking a direction to refrain the Central Government from invoking the bank guarantee in connection with a mining project in Maharashtra.

Senior Advocate Sandeep Sethi with Advocate Purti Marwaha represented the petitioner.

 ASG Maninder Acharya with Standing Counsel Jasmeet Singh represented the Central Govt.

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The petition of Indrajit Power Pvt Ltd urged to quash the Central Government’s decision to appropriate the Bank Guarantee in its favour in connection with the mining project in Maharashtra. The Petitioner sought a direction to refrain Central Government (Respondent) from appropriating the bank guarantee and also prayed for extension of time to complete the pending project after renewal of the bank guarantee.

The Respondent invoked the guarantee on account of the Petitioner failing to comply with parameters laid down in the Coal Mine Development and Production Agreement.

The Petitioner submitted that it ran a captive power plant for a company which has been closed down because of lockdown and had no immediate source of revenue and if the amount from the bank guarantees was appropriated. It would lead to non-payment of salaries of the employees and the Petitioner shall be pushed into default and effectively towards being declared as NPA.

The petitioner contended that the Respondent did not consider the submissions made by it in its reply to show cause notice.

The Petitioner also submitted that the invocation of bank guarantee was also barred in view of the prevailing situation of COVID-19 pandemic and the stipulation of Force Majeure shall apply. Reliance was also placed on recent orders extending relief to businesses during the present times.


The Central Government informed the Court that the decision to invoke bank guarantee was taken after due compliance of natural justice and provisions of Coal Mine Development and Production Agreement.

The Respondent submitted,

The Petitioner had not completed milestones since April-June 2018 and two show-cause notices had also been issued to it. An extension of 12 months to meet the parameters had also been granted to the Petitioner.

Central Government argued that the bank guarantee was unconditional and irrevocable .There could be no fetters upon encashment of the same unless in exceptional cases of irretrievable injustice or fraud.

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Since both the elements were absent in the present case, the petition ought to be dismissed.

The Court opined that the other orders passed during the lockdown were not applicable to the present case for the reason that the lockdown came into force with effect from March 24 and in spite of an extension of 12 months, the Petitioner could not fulfil its obligation and continued to default.

The Court stated that the Central Government had rightly been rejected the petitioner’s request for extenstion of deadline and then decided to impose a penalty.

The decision to invoke the bank guarantee was neither illegal nor perverse or discriminatory, the court dismissed the plea on this ground.

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