Summary
Bank guarantees securing environmental compliance remained independent contracts enforceable according to their terms. Their regulatory purpose did not itself require a separate hearing before invocation. The Pollution Control Board’s demand identified reviewed noncompliance and inspection violations and satisfied the guarantees’ conditions. The Court reversed the Tribunal’s direction to refund Rs.25 lakh.
Issues
- Whether guarantees securing environmental obligations required a prior hearing before invocation.
- Whether the Board invoked these guarantees according to their terms.
Held
- A bank guarantee is independent of the underlying relationship and must be construed by its own terms. Courts ordinarily should not interfere with conforming invocation absent fraud, irretrievable injustice or special equities. (¶ 17–19)
- The guarantees required payment upon a conforming demand; the bank did not have to determine the underlying justification. Their environmental-compliance purpose did not support the Tribunal’s additional hearing requirement. (¶ 16–20)
- The company had received a show-cause notice and responded, and its own subsequent letter acknowledged invocation. The demand referred to compliance review and observed violations, satisfying the instruments’ stipulated conditions. (¶ 21–22)
Result
Appeal allowed without costs; Tribunal judgment directing refund of Rs.25 lakh under the three bank guarantees set aside. Pending applications disposed of.