The Supreme Court has permitted the RBI to take regulatory action against the Bank of Baroda for failing to honour a bank guarantee.

Indian Oil Corporation had won a case in the Calcutta High Court on February 10 against BoB for failing the oil refiner from cashing out a bank guarantee issued by a defaulter. The high court permitted regulatory action against the bank. BoB had challenged the high court order before the apex court.

The matter related to a bank guarantee issued on behalf of Simplex Projects Ltd. A guarantee of Rs 6.97 crore was furnished by BoB to Indian Oil Corporation (IOCL) on behalf of Simplex.

IOCL had raised a demand to encash the amounts under the bank guarantee, which the lender did not release since the guarantee was not valid on the date of its invocation. The Supreme Court has refused to interfere with the Calcutta High Court order which had asked Reserve Bank of India (RBI) to revoke the license of BoB r

“We do not find any ground to interfere against the Order impugned in the Special Leave Petitions. The Special Leave Petitions are, accordingly, dismissed. However, it shall be open to the Reserve Bank of India to take such action as may be necessary in the facts and circumstances of the case, in the modification of the direction of the High Court as contained in page 4 of the impugned order…” a vacation bench of Justices Hemant Gupta and Justice Aniruddha Bose said in an order passed on Monday.