Need someone to read Bank.guarantee wordings

753 votes

Actually, in law and practice, it doesn’t work this way. A bank guarantee is not something the customer gives to the bank; it is something the bank issues in favor of a third party (called the beneficiary) on behalf of its customer (called the applicant). I can interpret the Bank Guarantee for you.

Advocate Pankaj Bajaj LawRato

881 votes

if you have made a bank guarantee the bank cannot directly and go and unilaterally renew the bank guarantee, the bank guarantee has some auto renewal clause or any other similar clause added to it should be checked or there might be something else which is missing for that bank guarantee need sto be checked

Advocate Moksh Jain LawRato

925 votes

In matters relating to Bank Guarantees (BG), the enforceability, validity, renewal, and liability of both the bank and the applicant are governed entirely by the wording of the BG document itself. While you have explained the background of the case and mentioned that the BG was originally issued for five years and has since expired, the key question—whether the bank is legally permitted to unilaterally renew the BG—cannot be answered with certainty without examining the exact terms and clauses of the guarantee. Some BGs are issued with a fixed validity period and automatically lapse upon expiry if not invoked, while others contain “auto-renewal” or “until discharged” clauses that allow the bank to continue extending the BG until the beneficiary expressly releases it. Courts, including the Supreme Court, have repeatedly held that a bank’s liability under a BG is strictly confined to the language of the instrument and no assumption can be made beyond its text. Therefore, in your case, the first and most important step is to carefully review the BG copy to identify whether it contains any clause that authorises automatic or unilateral renewal. Without that examination, any legal opinion would remain incomplete. Accordingly, I request you to kindly provide a clear scanned copy of the complete Bank Guarantee so that I may scrutinise the operative clauses and confirm whether the bank has acted within its rights or exceeded its authority. Only then can an appropriate legal strategy—whether cancellation, notice, or escalation—be advised with precision.

Advocate Sanil Sarkar LawRato