BANK GUARANTEE IN FAVOUR OF GOVERNMENT

This agreement is made on this……………day of 2005 between the Governor of Tamil Nadu (hereinafter called the government) of the one part and TN Bank Ltd. a banking company registered under the Companies Act 1956 and carrying on business, inter alia, at Tamil Nadu hereinafter called the bank (which expression shall unless the context otherwise requires include its successors) of the second part and Builders Ltd. a company registered under the Companies Act 1956 and carrying on business at P.T. Road, Chennai hereinafter called the contractor (which term shall include unless repugnant to the context its successors).
Whereas Builders Ltd. has been awarded a contract for construction of a housing complex at Green Avenue, Chennai for Rs. 350 lakhs and is required to deposit security money for Rs. 35 lakhs./
And whereas in consideration of the Government having agreed to exempt the contractor from depositing the security deposit of Rs. 35 lakhs under the terms and conditions of the Contract entered into between the government and the contractor on the contractor furnishing a Bank Guarantee for security deposit amount in favour of the GOVERNMENT for the due fulfillment by the contractor of the terms and conditions of the agreement with the Government.
And whereas the contractor has approached the bank for issue of such a guarantee in favour of the government on behalf of the contractor for the performance and discharge of the obligations of the contractor under the said contract entered into by and between the government and the contractor.
And whereas the contractor has approached the bank for issue of such a Bank Guarantee in favour of the government and is agreeable to deposit the requisite margin money as also to execute a Counter Guarantee in favour of the bank.
And whereas the government has forwarded a draft copy of the Bank Guarantee which the contractor has scrutinised and approved and directed the bank to issue a Bank Guarantee in favour of the government in accordance with the terms contained in the draft Bank Guarantee forwarded by the government.
Now therefore these presents witnesseth and the parties hereby agree as follows:
1. The bank hereby undertakes to pay to the government upto Rs. 35 lakhs as may be due and payable under this Guarantee on the first demand being made without any demur irrespective of any dispute between the contractor and the government in respect of any amount of claim against the contractor as being due by way of loss or damage caused to and suffered by the government without any question as to the factum or quantum thereof provided that the liability of the bank shall be restricted to an amount not exceeding Rs. 35 lakhs covered by the guarantee.
2. The Bank Guarantee contained herein shall remain in full force and effect for a period of 12 months from the execution hereof and that it shall continue to be enforceable by the government till all the dues thereunder or by virtue of the said agreement have been duly paid and the claim will be satisfied or discharged or that the said agreement is fully carried out by the said CONTRACTOR.
3. The bank agrees and declares that the government shall have the fullest liberty without the written consent or prior approval and without affecting anything in any manner any obligation hereunder to vary any of the terms and conditions of the said agreement or to extend the time of performance by the contractor from time to time or to postpone at any time or from time to time any of the powers exercisable by the government against the contractor and to forbear to enforce any of the terms and conditions relating to the said agreement and it is declared that notwithstanding any such variation or extension or forbearance, act, omission or indulgence on the part of the government in favour of the contractor, the guarantor shall not be released of its liability by reason of any such variation, extension or acts of forbearance.
4. The bank hereby undertakes not to revoke the guarantee during its currency except with the previous consent in writing of the government.
Any claim for breach of the contract by the contractor or for any loss or damages suffered by the government should be made by invocation of the Bank Guarantee within the validity period of the said guarantee. No claim under the guarantee shall be entertained after the expiry of the Bank Guarantee period.
5. The bank further undertakes not to revoke the guarantee during the currency of the guarantee except with the previous consent in writing of the government in case of any dispute between the contractor and the government in relation to their contract. On invocation of the Bank Guarantee the bank would pay to the government without any question as to any breach of the agreement or loss sustained or otherwise and the invocation in terms of the guarantee will be taken as final and conclusive.
In witness whereof the parties herein executed these presents on the 10th day of June 2005 at Calcutta.
Signed, sealed and delivered by TN Bank Ltd. by its authorised
agent Mr………………….
in the presence of:                                                                               Signature