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The Bombay High Court has ruled that Axis Bank cannot force Bank of Baroda to pay the ₹8.56 crore guarantee that the latter had offered for a loan provided by Axis Bank to Nakshatra Brand Ltd.
In November 2016, Axis Bank had sanctioned a ‘gold metal loan’ worth ₹100 crore to Nakshatra — the bank would provide the metal and the borrower would repay in cash. Vijaya Bank (since merged with Bank of Baroda) stood guarantee for the loan. Axis Bank supplied 30 kg of gold in three tranches. Nakshatra defaulted on repayment. Axis Bank asked Bank of Baroda to pay the guarantee, which worked out to ₹8.56 crore plus 17.4 per cent interest. Bank of Baroda refused and, instead, called for “additional information and documents” from Axis Bank. This, according to Axis Bank, was wrong and unjustified because, under the terms of the bank guarantee, Bank of Baroda (Vijaya Bank) had to pay “without contest, demur or protest”.
Bank of Baroda argued that it was “entitled to an unconditional leave to defend the suit as substantial and triable issues arise in the context of an egregious fraud which vitiated the entire transaction”. Nakshatra and its promoters/directors are being investigated by law enforcement agencies for alleged systematic fraud.
SC brooks no delay
If you are a public servant and the Supreme Court orders you to do something, you better not wait for permission from your superiors. This was made loud and clear by Supreme Court judges Justice BR Gavai and Justice Vikram Nath in the Junagadh Municipal Corporation vs Adarsh Housing Cooperative Society case.
Expressing their displeasure over the conduct of Rachit Raj, Collector of Junagadh district, who (apparently) waited for the permission of his superiors to implement an order of the Supreme Court, the judges said, “When an order has been passed by the highest court of the country, there is no occasion for the collector to seek permission for implementation of the orders passed by this court.”
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