NCLAT: Consideration of Debt Restructuring by Lenders Doesn’t Bar Member from Initiating Proceedings  ||  Delhi High Court: In Matters of Medical Evaluation, Courts Should Exercise Restraint  ||  Delhi HC: Any Person in India Has Right to Legally Import Goods from Abroad and Sell the Same  ||  Delhi HC: Waiver to Section 12(5) of Arbitration Act to be Given Once Tribunal is Constituted  ||  Supreme Court Has Asked States to Regularise Existing Court Managers  ||  SC: Union & States to Create Special POSCO Courts on Top Priority  ||  SC Upholds Authority of CERC to Award Compensation for Delays  ||  SC: Arbitral Tribunal Has Discretion to Include in Sum Awarded, Interest at Rate as it Deems Reasonab  ||  SC: Cannot Use Article 142 to Frame Guidelines on Judicial Recusal  ||  SC: Satisfaction Recorder in One EP Won’t Affect Subsequent EPs for Future Breaches    

Shapoorji Pallonji & Co. Pvt. Ltd. Vs. The Indure Private Limited and Ors. - (High Court of Delhi) (08 Feb 2021)

Invocation of a bank guarantee cannot be injuncted merely on ground that disputes are pending between the parties

MANU/DE/0200/2021

Arbitration

The Petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 ( A&C Act), praying that direction be issued to Respondent no. 1 to return the original Advance cum Performance Bank Guarantee dated 4th February, 2010 ("the PBG") as extended from time to time. The Petitioner also seeks an order restraining Indure from invoking and encashing the said bank guarantee. It is further prayed that, Respondent no. 2 (Standard Chartered Bank) be restrained from acting on any letter seeking extension or encashing the PBG.

There is no dispute that, the PBG is an unconditional bank guarantee. Thus, the principal question to be examined in the present case is whether the order interdicting encashment of an unconditional bank guarantee is warranted in the facts and circumstances of present case.

The law with regard to interdicting unconditional bank guarantees is well settled. A bank guarantee is a separate contract and is required to be performed on its own terms. An injunction restraining the encashment of a bank guarantee can be passed in exceptional cases of egregious fraud, irretrievable injustice and considering special equities.

Plainly, invocation of a bank guarantee cannot be injuncted merely on the ground that disputes are pending between the parties. In present case, none of the above grounds for interjecting the Bank Guarantee are established. There is no allegation of egregious fraud much less the fraud that vitiates the underlying transaction. An order restraining the encashment of the PBG cannot be granted.

The Petitioner also prays that an order be passed restraining the Respondent from transferring, alienating or dealing with, creating third party rights in any manner or encumbering its assets till such time, Indure does not discharge its entire liability. It is averred that, Indure may not be in a position to repay any of its debts considering its financial condition. However, it is seen that the necessary pleadings required for seeking an order in the nature of attachment before judgment, as contemplated under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908, (CPC) are absent. Thus, insofar as the aforesaid prayer is concerned, present Court grants liberty to the Petitioner to approach the Arbitral Tribunal. The petition is disposed of.

Tags : BANK GUARANTEE   ENCASHMENT   INJUNCTION  

Share :        

Disclaimer | Copyright 2025 - All Rights Reserved