Supreme Court on 'bank guarantees' & 'letter of credit' !

In a significant ruling, the Supreme Court has laid down guidelines for encashment of bank guarantee or letter of credit. A bench comprising justice Tarun Chatterjee and justice PK Balasubramanyan said, “We find that the following principles should be noted in the matter of injunction to restrain the encashment of a bank guarantee or a letter of credit (LoC). ” First, banks that give such guarantees are duty-bound to honour them as per terms agreed upon between the parties concerned, irrespective of any dispute raised by its customer. In the matter of invocation of a bank guarantee or an LoC, it is not open for the bank to rely upon the terms of the underlying contract entered into between parties concerned, court said.

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CCI News Desk

Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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