Tarun Nagda (Engineer) 13 January 2012

Bank guarantee

Sir

We are participating in a tender of supply of electrical equipments for a company from UP wherein we have to submit a bank guarantee of stamp value Rs 7500 (as per tender specification).

Since we are based in MP, request you to kindly clarify the following:

a) Is it necessary for us to submit Bank guarantee of Rs 7500 stamp paer?

b) Is BG of Rs 250 (as per MP stamp ACT) sufficient?

c) Can the beneficiary reject our bid if we submit BG with stamp paer Rs 250 instead of Rs 7500.

d) What does law say about bank guarantees wrt which state's stamp act to follow?

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sanjay kumar (BE/ LLM in Corporate Laws) 13 January 2012

A Bank-guarantee is a kind of promise which the Bank makes to the beneficiary to pay a certain amount on notice of demand from the beneficiary. Thus its a contract between the Bank and the beneficiary. Please check with your Bank regarding the Stamp-paper value. Also, Take a clariification from the company in case there is discrepency in the amount quoted by your Bank and that mentioned in the Tender. The beneficiary can reject your Bid in case the stamp-paper value mentioned in the tender is in order as per UP laws. As regards jurisdiction, it must be a clause in the Tender and the jurisdiction must be lying with UP Courts. So the laws of UP shall prevail.

Bank guarantee

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