ANDHRA PRADESH POLLUTION CONTROL versus CCL PRODUCTS (INDIA) LIMITED

Citation: [2019] 10 S.C.R. 855 · Decided: 22-07-2019 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Judgment (excerpt)

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ANDHRA PRADESH POLLUTION CONTROL BOARD
v.
CCL PRODUCTS (INDIA) LIMITED
(Civil Appeal No. 7005 of 2017)
JULY 22, 2019
[DR. DHANANJAYA Y CHANDRACHUD AND
INDIRA BANERJEE, JJ.]
Water (Prevention and Control of Pollution) Act, 1974 –
Environment (Protection) rules, 1986 – Respondent was
manufacturing and selling instant coffee – Appellant received
complaints against the appellant in regard to the environmental
pollution – A Task Force Committee was constituted by the appellant,
which after hearing the respondent issued some directions – In
addition, the appellant directed respondent to furnish bank
guarantee of Rs.25 lakhs to secure the compliance with conditions
specified in the directions – Respondent furnished the required bank
guarantee – Thereafter, Board officials of the appellant inspected
the industry and observed certain violations – Pursuant thereto,
the bank guaranties were invoked and amount of Rs.25 lakhs
covered by the bank guarantees was paid over to the appellant –
Aggrieved, respondent moved to the Tribunal – Tribunal held that
Principles of natural justice were not followed and invocation was
unwarranted and directed appellant to refund the amount to the
respondent – On appeal, held: It was not for the bank to determine
as to whether the invocation of the bank guarantee was justified so
long as the invocation was in terms of the bank guarantee – A
demand once made would oblige the bank to pay under the terms
of the bank guarantee – In the instant case, the bank correctly
understood its legal obligations and paid over the amount to the
appellant – Thus, having regard to the terms of the bank guarantees,
the principle of law formulated by Tribunal cannot be accepted –
Besides, it is evident from materials on record that a show cause
notice was issued by the appellant to the respondent and respondent
had also submitted a response – Thus, Tribunal erred in interfering
with the invocation of the bank guarantees, as appellant had clearly
   [2019] 10 S.C.R. 855
855
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SUPREME COURT REPORTS
[2019] 10 S.C.R.
adverted to the fact that the status of compliance was reviewed in
the Task Force Committee meeting and the officials had observed
certain violations – The invocation of the bank guarantees was
therefore in terms of the conditions stipulated in the bank
guarantees.
The respondent commenced its operations in 1995 for the
manufacture and sale of instant coffee. Complaints were received
by the appellant and by the District Collector in regard to the
environmental pollution caused by the appellant. A Task Force
Committee was constituted by the appellant which, after hearing
the respondent, issued directions to it on 12 August 2011. In
addition, the appellant directed the respondent to furnish three
bank guarantees: two in the amount of Rs 10 lakh each and the
third in the amount of Rs 5 lakh to secure compliance with the
conditions. On 6 September 2011, three bank guarantees
executed by the Bank were furnished to the appellant. The Board
officials inspected the industry and observed certain violations.
Pursuant thereto, the bank guarantees were invoked on 12
September 2012 and the amount of Rs 25 lakh covered by three
bank guarantees was paid over to the appellant. The Tribunal
held that the invocation was unwarranted and the amount which
has been received by the appellant should be refunded to the
respondent. Hence, the present appeals.
Allowing the appeal, the Court
HELD : 1. The settled legal position which has emerged
from the precedents of this Court is that absent a case of fraud,
irretrievable injustice and special equities, the Court should not
interfere with the invocation or encashment of a bank guarantee
so long as the invocation was in terms of the bank guarantee.
[Para 19] [866-E-F]
2. In the present case, the bank undertook to the appellant
that it would pay the guaranteed amount on demand, subject to
the overall amount stipulated in each of the three bank
guarantees.  It was not for the bank to determine as to whether
the invocation of the bank guarantees was justified so long as the
invocation was in terms of the bank guarantee.  A demand once
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made would oblige the bank to pay under the terms of the bank
guarantee.  The Bank correctly understood its legal obligations
and paid over the amount to the appellant.  In this view of the
matter and having regard to the terms of the bank guarantees,
this Court is of the view that the principle of la

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