BG-Bank Guarantee

Bank Guarantee
An undertaking by a bank to be answerable for payment of a sum of money in the event of non performance by the party on whose behalf the guarantee is issued.

BG FOR LEASING-

1.

The Lessee submits this LOI/Contract with full banking coordinates client’s information Sheet (Addendum ‘A’), Corporate Board Resolution (Addendum ‘B’), Fee Protection Agreement (Addendum ‘C’) and Clear color copy of the Lessee’s Signatories Passport;
2.

The Lessor signs this LOI/Contract providing Lessor’s full banking coordinates and returns it to the Lessee. The LOI/Contract upon being signed and returned by the Lessor to the Lessee shall then become a formal legally binding Contract between both parties;
3.

After signing and returning of this LOI/Contract, both parties shall lodge the LOI/Contract with their respective banks;
4.

Within Three (3) International banking days the Lessee shall officially inform the Lessor by E-Mail/Fax the “Window Time” to send “S.W.I.F.T. MT-199” to the Lessor’s Bank. The Lessors will advise their own bank the readiness to receive the MT-199 (Addendum ‘D’) at the appointed “Window Time”” the Lessee shall cause its Bank to SWIFT the verifiable MT-199 without delay;
5.

Lessor’s Bank will verify Authenticate and validate the received Funding Instrument MT-199 Within Three (3) banking days, Lessor’s bank will issue a SWIFT Pre-advice message (Addendum ‘E’) to Lessee’s Bank confirming that Lessor’s Bank is RWA to deliver a BANK GUARANTEE (Addendum ‘F’) in the attached text to the Lessee, providing that Lessee’s Bank will issue a SWIFT MT-103/23 to settle account;
6.

Within three (3) Banking days, Lessee’s Bank will send the Swift MT-103/23 (Addendum ‘G’) to the Lessor’s bank for the first tranche payment;
7.

Within three (3) banking days, upon successful verification, Lessor’s bank will transmit the Bank Guarantee Instrument via SWIFT MT760 to Lessee’s Bank containing CUSIP Registration Numbers, Custodial Safe Keeping Receipt Numbers, ISIN Numbers, Term, Text of Instruments, Denominations, Name(s) of Issuing Banks(s), Date of Issue, Date of Maturity, Access Code and all pertinent data necessary for the Lessee’s Bank to authenticate and validate the data of the Instrument via Euroclear or DTC including a guarantee from the Lessor’s Bank to deliver the Instruments;
8.

Lessee’s Bank will authenticate and validate the Bank Guarantee Instrument and confirm satisfaction to Lessor’s Bank marking the conclusion of the delivery of the first tranche. Lessee’s bank shall within Eight (8) International Banking Hours release full payment to Lessor’s designated bank via Fed-Wire or according to the MT-103;
9.

Within Eight (8) International Banking Hours after receipt of clear funds, Lessor’s Bank will electronically deliver the Bank Guarantee and deliver hard copy Bank Guarantee Instruments within Seven (7) International banking days to the Lessee or his bank as specified in the funding instrument;
10.

Simultaneously the Lessee shall effect payment to all the intermediaries according to the Master Fee Protection Agreement without delay or holding. The Master Fee Protection Agreement with this Transaction code and date shall be made an integral part of this LOI/Contract as an attachment;
11.

The above procedures shall be repeated for subsequent tranches.

BG FOR DISCOUNTING-

1.

The buyer submits this LOI with full banking co-ordinates, Corporate profile (CIS), a clear color copy of the Buyer signatory’s passport and a Proof of Fund for purchasing of the said Bank Guarantee;
2.

The Seller signs this LOI/Contract upon successful probe of Proof of Fund of Buyer party and provides Seller’s full banking coordinates and returns it to the Buyer. The LOI/Contract upon being signed and returned by the Seller to the Buyer shall then become a formal legally binding Contract between both parties;
3.

After signing and returning of this LOI/Contract, both parties shall lodge the LOI/Contract with their respective banks;
4.

Seller’s Bank will SWIFT the full text Pre-Advice of the Bank Instrument to Buyer’s bank. Upon Buyer’s Bank successful verification and authentication of the Pre-advice, Within three (3) working days, Buyer will instruct his funding bank to swift ICBPOs in the form of MT103-Field 23 for Seller’s Bank verification and authentication;
5.

Upon Seller’s Bank successful verification and authentication of the MT103/23, Seller’s Bank will swift a certified Corporate Invoice to Buyer’s Bank containing: CUSIP/Registration Numbers, Custodial Safekeeping Receipt Numbers, ISIN Numbers, term, text of instruments, denominations, name(s) of issuing bank(s), date of issue, date of maturity, access code and all pertinent data necessary for the Buyer’s Bank to authenticate and validate the data of the invoiced instrument via swift MT760;
6.

Upon the successful verification and authentication of the said Invoice, the Buyer’s Bank will release the fund to the Seller’s designated account within eight (8) banking hours;
7.

Upon Seller’s Bank receipt of the fund, Seller Bank will deliver the hard copy of BG to the buyer’s designated bank by bank courier within seven (7) banking days;
8.

Simultaneously, the BUYER shall effect payment to all the intermediaries according to the Master Fee Protection Agreement (MFPA) without delay or withholding. A MFPA with this Transaction Code and date shall be made an integral part of this LOI/Contract;
9.

The above procedures shall be repeated for subsequent tranches.

BG Format..

BANK GUARANTEE FORMAT

COMPANY ADDRESS

THIS DEED OF GUARANTEE is made on this …DAY OF ………………. by

……….and/or governed by the Banking Co. Regulation Act and having its Head Office

at ………….. (hereinafter called the "Bank" which expression shall wherever the

context so admit, include its executors, administrators and successors) in favour of

Metaljunction Services Limited, a public limited company incorporated under the Indian

Companies Act, 1956, having its registered office at Jeevan Bharati Building, Tower-1,

10th Floor, 124, Connaught Circus, New Delhi 110 001, (hereinafter referred to as

"Metaljunction" which expression shall include its executors, successors and permitted

assigns).

Metaljunction has allowed M/s. ……HAVING ITS OFFICE AT

(hereinafter called the "Party" which expression shall include its executors, administrators

and successors in this act) to participate in e-selling events conducted by it from time to

time on providing a duly signed undertaking dated _______ in the form of

“Statement of Interest Form – Buyer” (hereinafter referred to as SOI for the sake of

brevity).

AND WHEREAS as per the said “SOI”, the Party is required to fulfill all its

commitments as per the terms & conditions of the e-selling events held by

Metaljunction from time to time in which the party participates, by making bid /

bids. These terms and conditions would be specified by Metaljunction for each eselling

event, in which the party participates (hereinafter referred to as ‘terms and

conditions’).

AND WHEREAS as per the said SOI, the Party is required to furnish a Bank

Guarantee for a sum of Rs.80,000/- (Rupees eighty thousand only) as security for

fulfilling its commitments to Metaljunction as stipulated in the SOI as also the terms

& conditions of the e-selling events in which the party participates, to be kept valid

till satisfactory fulfillment of all its commitments as stipulated in the said terms &

conditions

AND WHEREAS THE BANK has agreed to stand as surety on behalf of the Party and

execute this guarantee for the satisfactory performance of the said terms & conditions

by the Party.

NOW THEREFORE, THE DEED OF GUARANTEE WITNESSETH AS

FOLLOWS:

1) IN CONSIDERATION OF WHAT IS STATED HEREINABOVE THE

BANK hereby guarantees that the Party will duly comply with all his/ their

obligations under the said terms & conditions thereof., WE THE BANK

UNDERTAKE TO PAY THE AMOUNTS DUE AND PAYABLE UNDER

THIS GUARANTEE, WITHOUT ANY DEMUR, MERELY ON DEMAND

SUCH AMOUNT/AMOUNTS as the surety may be called upon by

Metaljunction to pay, but not exceeding in the aggregate, the said sum of

Rs.80,000.00 (Rupees eighty thousand only).

2) The surety further undertakes that this guarantee shall be kept valid and binding

on the Bank from the time this guarantee is given until fulfillment of all its

commitments as provided in and as per the terms and conditions of the said

contract and the liability of the surety hereunder shall not be impaired and/or

discharged by any extension of time or variations or alterations made, given,

considered or agreed with or without the surety's knowledge or consent by or

between the parties involved and it will remain valid till all the terms &

conditions are duly satisfied.

3) We, the surety, also agree that we shall not during the currency of this guarantee

herein given or during the period of its extension, if any, revoke the same even by

giving notice to Metaljunction.

4) It is not obligatory on the part of Metaljunction to establish non-fulfillment of the

contractual obligations by the Party as stipulated in the terms & conditions under

the terms of this guarantee, we the surety will, on simple demand from

Metaljunction, pay to this Metaljunction Services Limited, the said amount of

Rs.80,000.00 (Rupees eighty thousand only) as indicated in clause (1) above

without demur and without requiring Metaljunction to invoke any legal remedy

that may be available to them to compel us the surety to pay the same even if the

Party considers such demand of Metaljunction as unjustified.

5) Notwithstanding anything to the contrary, Metaljunction's decision as to whether

the Party had made any default or defaults or committed a breach of contract and

the amount to which Metaljunction is entitled by reasons thereof, will be binding

on us and we shall not be entitled to ask Metaljunction to establish its claims under

this guarantee but, we surety, shall pay the sum forthwith without any objection or

query.

6) The decision of Metaljunction that any sum has become payable shall be final and

binding on the surety.

7) This guarantee shall be in addition to any other security or guarantees whatsoever

that Metaljunction may now or at any time in any way have or shall arrange in

relation to the Party's obligations/liabilities under and/or in connection with the

said contract and Metaljunction shall have full authority and liberty to take

recourse to or to enforce this guarantee in preference to those other security or

securities or assurances, at its sole discretion.

8) The guarantee shall not be determined or affected by the liquidation or winding

up, dissolution or change in the constitution of or insolvency of the Party but shall

in all respects and for all purposes be binding and operative until payment of all

sum or amounts payable to Metaljunction in terms hereof, are made.

9) The amount stated in any notice of demand addressed by Metaljunction to the

surety as liable to be paid Metaljunction by the Party or as suffered or incurred by

Metaljunction on account of losses or damages or costs, charges, or expenses shall,

as between the surety and Metaljunction, as the case may be, be conclusive and

payable by the surety to Metaljunction.

WE THE BANK FURTHER AGREE THAT THE GUARANTEE HEREIN

CONTAINED SHALL REMAIN IN FULL FORCE AND EFFECT DURING THE

PERIOD THAT WOULD BE TAKEN FOR THE PERFORMANCE OF THE SAID

terms & conditions AND THAT IT SHALL CONTINUE TO BE ENFORCEABLE

TILL ALL THE DUES OF METALJUNCTION UNDER OR BY VIRTUE OF THE

SAID terms & conditions HAVE BEEN FULLY PAID AND ITS CLAIM

SATISFIED/DISCHARGED OR TILL METALJUNCTION CERTIFES THAT THE

TERMS AND CONDITIONS HAVE BEEN FULLY AND PROPERLY CARRIED

OUT BY THE PARTY

10) All the claims under this guarantee must be presented to the Bank.

11) Notwithstanding anything contained hereinbefore, our liability under this

guarantee is restricted to Rs.80,000.00 (Rupees eighty thousand only). The

guarantee is valid up to ……. UNLESS a claim or demand made IN WRITING

IS PRESENTED TO US WITHIN THREE MONTHS OF THE SAID

EXPIRY PERIOD OF THIS GURANTEE ALL YOUR RIGHTS UNDER

THIS GURANTEE SHALL BE FORFEITED AND WE SHALL BE

RELEASED AND DISCHARGED FROM ALL LIABILITIES

THEREUNDER.

12) IN WITNESS WHEREOF the surety has executed this Deed of Guarantee on

….. day of …. and the year hereinbefore mentioned, in the presence of :

Witness :

1.

2.

Diff between LC/BG

A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the loss if the transaction doesn't go as planned.

A letter of credit is an obligation taken on by a bank to make a payment once certain criteria are met. Once these terms are completed and confirmed, the bank will transfer the funds. This ensures the payment will be made as long as the services are performed.

A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line of credit, the sum is only paid if the opposing party does not fulfill the stipulated obligations under the contract. This can be used to essentially insure a buyer or seller from loss or damage due to nonperformance by the other party in a contract.

For example a letter of credit could be used in the delivery of goods or the completion of a service. The seller may request that the buyer obtain a letter of credit before the transaction occurs. The buyer would purchase this letter of credit from a bank and forward it to the seller's bank. This letter would substitute the bank's credit for that of its client, ensuring correct and timely payment.

A bank guarantee might be used when a buyer obtains goods from a seller then runs into cash flowdifficulties and can't pay the seller. The bank guarantee would pay an agreed-upon sum to the seller. Similarly, if the supplier was unable to provide the goods, the bank would then pay the purchaser the agreed-upon sum. Essentially, the bank guarantee acts as a safety measure for the opposing party in the transaction.

These financial instruments are often used in trade financing when suppliers, or vendors, are purchasing and selling goods to and from overseas customers with whom they don't have established business relationships. The instruments are designed to reduce the risk taken by each party.