DAEWOO MOTORS INDIA LTD. versus UNION OF INDIA AND ORS.

Citation: [2003] 2 S.C.R. 276 · Decided: 20-02-2003 · Supreme Court of India · Bench: S.S.M. QUADRI, ASHOK BHAN · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
c 
DAEWOO MOTORS INDIA LTD. 
v. 
UNION OF INDIA AND ORS. 
FEBRUARY 20, 2003 
[SYED SHAH MOHAMMED QUADRI AND 
ASHOK BHAN, JJ.] 
Customs Act, 1962: 
S. 25(1)-Exemption Notification No. 111195-CUS. dated 5.6.1995-
Export Promotion Capital Goods Scheme-To faljil export obligation Company 
obtained various import licences in respect of which bank guarantees famished 
from various banks-Jn respect of CJF value 'of rupees one hundred crore and 
more period to fa/fl/ export obligation was extended--But later extension 
D period revoked and bank guarantees invoked-Company contending that since 
the period for compliance of export obligation was extended, the bank 
guarantees cannot be permitted to be encashed as ample time is available to 
the company to discharge the export obligation-Held, order extending export 
obligation has been revoked-Even otherwise, plant of the company has been 
closed down-Public notices have been issued for auctioning the plant by the 
E Company itself-When there is no chance of the Company fa/filling its export 
obligation, action of the respondent invoking the bank guarante~s cannot be 
said to be premature and unjustified, muchless arbitrary and illegal so as to 
warrant any interference by the Court-Export-import-Bank guarantee. 
F 
Banks/Banking: 
Bank guarantee-Invoking of-Resistance by Bank-Company obtaining 
import licences to fa/fl/ export obligation under Export Promotion Capital Goods 
&heme-Bank guarantees famished-Jn respect of CIF value of rupees one hundred 
crore and more, period to fulfil export obligation extended but later 
extension period revoked and bank guarantees invoked-Bank resisting on 
G the ground that bank guarantees furnished by it were conditional and there 
being enough time to fa/fl/ export obligation bank guarantees cannot be 
encashed-Held, for encashment of bank guarantee bank cannot have . 
any valid resistance except, of course, in a case of fraud-The bank 
guarantee furnished by the bank is an unconditional and absolute bank 
guarantee-The clause in the bank guarantee specifically provides that 
fl 
276 
DAEWOO MOTORS INDIA LTD. v. U.0.1. 
277 
;;; 
the demand made by the President.of India shall be conc/Wiive as regards the A 
. 
amount due and payable under the bank guarantee and the liability under th~ 
guarantee is absolute and 11nequivocal-Bank has no case to resist encashment 
of bank guarantee. 
Mis Hindu"sian Construc1fon Company Ltd. v. State of Bihar and Ors., 
.B 
119991 8 sec 436, heid inapplicable. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1502-1503 
of 2003. 
From the Judgment and Order dated 16.7.2002 of the Delhi High Court c 
in C.M. No. 6714/2002 in C.W. P. No. 2002 of 2002. 
WITH 
C.A. No. 1504 of 2003. 
D 
S.K. Chowdhary, H.D. Talwani, B.K. Satija, Sunil Dogra, Ms. Rashi 
Malhotra, Ms. Ritu Bhalla, K. Swami, K.C. Kaushik, B. Krishna Prasad, 
Anant Kumar, Samir.S. Vasist, Pradeep Kumar Bakshi, Pranab Kumar Mullick 
and Sanjay Kapur for the appearing pruties. 
y 
The following Order of the Court was delivered : 
E 
Leave is granted. 
These appeals arise from a common judgement of the High Court at 
Delhi in Civil Miscellaneous No. 6714 of 2002 in Civil Writ Petition No. 
2002 of 2002 dated July, 16, 2002. 
F 
The controversy in these appeals relates to the encashment ,of the bank 
guarantee by the Union of India, the first respondent. As an import policy 
during the period 1995-1996, the first respondent introduced an "Export 
Promotion Capital Goods (E.P.C.G.) Scheme. The Scheme envisaged 
exemption from custom duty on the imported goods, plants and equipment, G 
etc., subject to the conditions incorporated in Exemption Notification No. 
111/95-CUS dated 5th June, 1995 which was issued under Section 25(1) of 
the Customs Act, 1962. The appellant in the appeals arising out of S.L.P. (C) 
Nos. 14657-14658 of 2002, Mis. Daewoo Motors India Limited, availed the 
Scheme which, inter alia, provided that upon importing plants and equipment, H 
' 
278 
SUPREME COURT REPORTS 
[2003] 2 S.C.R. 
A it should fulfil the export obligation equivalent to six times the CIF value of 
the goods which had been imported on FOB basis, or alternatively four times 
the CIF value of the goods imported on net foreign exchange basis within a 
period of eight months. The period was divided into different blocks. Agreeing 
to fulfil the export obligation, the appellant obtained various import licences 
B in respect of which bank guarantees were furnished by
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