Bank guarantee encashment must await the Collector’s decision under the contractual dispute clause.

The petitioner, a rice miller, sought to restrain the District Marketing Officer from encashing a bank guarantee furnished under a milling agreement, to quash the communication dated 23 September 2026, and to obtain acceptance of pending rice deliveries.

It submitted that Clause 14.1 of the agreement required disputes to be placed before the concerned Collector and sought interim protection while pursuing that remedy.

The respondents did not object to the petitioner seeking redress before the Collector in accordance with law.

1. Whether the petitioner should be directed to pursue the dispute-resolution process before the concerned Collector under Clause 14.1 of the agreement.

2. Whether encashment of the bank guarantee should be stayed while the Collector considers the petitioner’s grievance.

Clause 14.1 of the agreement provides for disputes between the parties to be resolved by the concerned Collector.

Clause 15.1 provides an arbitration remedy against an order passed by the Collector.

The order identifies no statute or precedent as the basis for its directions.

The Court noted that Clause 14.1 expressly designated the concerned Collector to resolve the dispute and that the respondents had no objection to the petitioner approaching that authority.

It therefore directed the petitioner to invoke that process and required the Collector to decide the grievance within a specified period.

To preserve the position pending that decision, the Court prohibited coercive steps concerning encashment of the bank guarantee.

It also noted that arbitration under Clause 15.1 remained available against the Collector’s order.

Until that decision, the respondents were restrained from taking coercive steps concerning encashment of the bank guarantee.

The petitioner remained at liberty to pursue arbitration under Clause 15.1 against any order of the Collector, in accordance with law.