Calcutta HC has directed RBI to cancel License of Bank of baroda


1. As per the recent order of Calcutta High Court in the case of Bank of Baroda, the HC has asked the RBI to consider taking appropriate steps against the bank, including revocation of its license, for its orderly conduct in dealing with payment against an unconditional bank guarantee.

2. While disposing of the cross objection filed by the Indian oil corporation(IOC), the division bench comprising Justice Sanjib Banerjee and Justice Kaushik Chanda directed-

“Considering the conduct of the appellants, the Reserve Bank of India should consider what appropriate steps may  be taken against the Bank of Baroda, including revoking its license or the authority to carry on banking business, if necessary.”

3. The case arises out of failure on part of the bank to release the payment in terms of the unconditional bank guarantee worth Rs.6.97 crore, furnished to the IOCL on behalf of Simplex Projects Ltd.


4. As per the IOCL, the bank guarantee was invoked after Simplex failed to live up to its obligations under the contract. Therefore, it contended that the bank had no right to stall immediate payment of the unconditional bank guarantee, let alone seeking extra time, as in this case. 

5. IOCL claimed that in the process, the bank informed simplex regarding the invocation of the bank guarantee pursuant to which Simplex promptly instituted proceedings under the section 9 of the Arbitration and  Conciliation Act, 1996 before the Delhi High Court, by virtue of the arbitration agreement contained in the matrix contract between IOCL and Simplex.

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