Delhi High Court Restrains Indian Oil From Encashing Punj Lloyd’s Bank Guarantees
The Delhi High Court has restrained Indian Oil Corporation Ltd. from invoking or encashing bank guarantees extended by Punj Lloyd Ltd. pertaining to work for its refinery in Haldia for one week after the national lockdown is lifted.
This comes after Punj Lloyd’s resolution professional filed a writ petition under Article 226 of the Constitution of India for quashing of Indian Oil’s communications to Central Bank of India and IDBI Bank Ltd. for invocation of the guarantees.
A single-judge bench of Justice C Hari Shankar said it was necessary to provide “limited relief” as the resolution professional couldn’t approach the Chennai bench of the National Company Law Tribunal due to the lockdown. The court, however, noted that its order won’t affect the merits of the bank guarantees.
Punj Lloyd had extended certain bank guarantees in favor of Indian Oil against a contract for the Haldia project but the state-run refiner sought to encash it after disputes arose between them last year.
NCLT Chennai stayed the invocation of certain bank guarantees in December.
Courts in India have been granting relief to companies affected by the coronavirus lockdown that has stalled all but essential goods and services for 40 days.
The Delhi High Court recently restrained Yes Bank Ltd., and Punjab and Sind Bank Ltd.. from classifying certain loan accounts as non-performing assets. Similarly, the Bombay High Court provided relief to two real estate companies by restraining ICICI Bank on similar grounds.
It also restrained debenture trustees from selling shares of Future Retail Ltd. and MEP Infrastructure Developers Ltd. after the stocks tumbled tracking the worst selloff in Indian equities in more than a decade.
What Punj Lloyd Said
The counsel for Punj Lloyd argued that:
- The company wants to approach the Chennai bench of NCLT for seeking injunction against invocation of bank guarantees. However, NCLT benches won’t commence hearing till the lockdown is lifted.
- The bank guarantees are set to expire in September and Indian Oil has an option to raise claims against them till the end of next year.
- The NCLT had already stayed invocation of some other guarantees by Indian Oil.
Indian Oil’s counsel argued that the company has already challenged NCLT’s interim stay on the grounds of jurisdiction. Any relief by the high court must not affect the merits of the case, it had contended.