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Karnataka HC imposes Rs 5 lakh cost on UBI

The court also directed the bank to pay the amount covered under the bank guarantees in favour of the petitioner with 18% interest.
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BENGALURU: The Karnataka High Court imposed a Rs 5 lakh cost on Union Bank of India (UBI) for failing to make payment of amounts covered under the bank guarantees in favour of a firm. The cost has to be paid to the Karnataka State Legal Services Authority.

Justice Suraj Govindaraj passed the order while allowing the petition filed by NHDPL South Pvt Ltd, questioning the order passed by the banking ombudsman, who refused the complaint filed by the company against UBI for not paying around Rs 8.5 crore by invoking the guarantees in its favour.

According to the order, NHDPL had entered into an agreement with AI Fara’a Infraprojects, Mumbai to execute civil works for a project called “Nitesh Melbourne Park” in Bengaluru. AI Fara’a, which borrowed money from UBI, had provided two bank guarantees in favour of NHDPL through UBI.

NHDPL in 2019 requested UBI to either renew bank guarantees or revoke them in its favour, but UBI did not accept it reasoning that the bank could not act upon the emails sent by the company when the agreement stated that request for invoking bank guarantees could be made only in a written letter sent physically or by post within the specified period for invoking the bank guarantees, while contesting that it did not receive a physical letter within the specified period.

Rejecting the contention of the bank, the court said that communication sent via email is equivalent to a written letter as per law and that the bank’s conduct is ‘dishonest’ as it wanted to protect its money. The court also directed the bank to pay the amount covered under the bank guarantees in favour of the petitioner with 18% interest.

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