Allow Cookies!
By using our website, you agree to the use of cookies
The Delhi High Court construed Exception 3 to section 28 of the Indian Contract Act 1872 in a key decision that it is not about a time limit for the lender to approach the court or tribunal for the enforcement of the bank guarantee rights. The Delhi High Court held this ruling. Exception 3 to Section 28 of the Contract Act clearly provides for the time limit to the creditor for the court to exercise his rights. The ruling drawn from Justice Jayant Nath did not deal in any way with the term for the claim during which the beneficiary was allowed to submit his claim to the bank/guarantor." The period of "Claim" is a period negotiated contractually between the creditor and the primary debtor, providing for a period of grace beyond the term of validity. Article 28 of the Contract Act provides, amongst other things, that the agreements imposed by the law on the execution of contractual rights will be null and invalid. Exception 3 of Section 28, which was incorporated by the 2013 amendment, nonetheless saves the provisions in bank guarantees for extinction of rights or responsibility executions made by banks or financial institutions following the expiration of the designated term. Exception 3 further states that this should be at least one year for a specific duration.
The Court has also highlighted that the PNB has acknowledged this legal position in its counter-affidavit. Exception 3 to Section 28 of the Contract Act clearly admits that a creditor's rights to pursue his bank guaranteed rights after an event has occurred." The High Court also alluded to Union of India and Anr. vs. Indusind Bank & Anr., a decision of the Supreme Court. "It is evident that in the mistaken opinion of the respondent No. 1(PNB), it is lawful to establish in the bank guarantee a claim time of 12 months without which the paragraph 28 of the Contract Act makes no provision. As mentioned above, the specified claim term is not covered by Article 28 of the Contract Law. It concerns the creditor's right to assert its bank guarantee rights when the guarantor refuses to pay before a court or court of competent law ", reaffirmed the Court.
Allow Cookies!By using our website, you agree to the use of cookies
Copyright Kalyan Krishna MediaZ Private Limited. All rights reserved. Unless otherwise indicated, all materials on these pages are copyrighted by Kalyan Krishna MediaZ Private Limited. All rights reserved. No part of these pages, either text or image may be used for any purpose. By continuing past this page, you agree to our Terms of Service, Cookie Policy, Privacy Policy and Content Policies.