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Adjustment of bg against interest or principle

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This query is : Resolved

Amit Bansal (Querist)

29 September 2012 if any interest chargeable Advance given to contractor is secured by BG and he is not able to pay the bothe interest and principle. Then whether at time of enashment of BG, we can adjust the interest before principle
e.g. Advance to Contractor is Rs 5.00 Crore and Interest Outstanding is Rs 2.00 Crore and BG is of 5.00 Crore. and after adjusting the BG aginst Intertest and remaning principle, can we go to the court for the unrealised part of advance.

And can we charge interest on unrealised part of advance?

Amol S Joglekar

Amol S Joglekar (Expert)

30 September 2012 It will depend upon the purpose for which you have taken the bank guarantee. Adjusting some thing UNILATERALLY in TALLY or some such software has no meaning. The purpose for which you have taken the bank guarantee is very important and deciding factor. If interest is covered in the said bank guarantee.... choice is with you to adjust the way you want. (In case of advances, our bankers first adjust it with interest and then to principal.

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