{"id":228746,"date":"2020-04-25T18:45:28","date_gmt":"2020-04-25T13:15:28","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=228746"},"modified":"2020-07-14T20:58:13","modified_gmt":"2020-07-14T15:28:13","slug":"special-equities-in-light-of-covid-19-and-its-impact-on-invoking-bank-guarantees","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/04\/25\/special-equities-in-light-of-covid-19-and-its-impact-on-invoking-bank-guarantees\/","title":{"rendered":"\u201cSpecial Equities\u201d in light of COVID-19 and its impact on invoking Bank Guarantees"},"content":{"rendered":"

Brief Overview<\/b><\/span><\/p>\n

The Delhi High Court in Halliburton Offshore Services Inc. <\/i>v. Vedanta Ltd.<\/i>[1]<\/strong><\/a> has passed\u00a0 <\/span>a detailed order dated 20.04.2020 granting interim relief to a party seeking restraint on the invocation and encashment of an unconditional bank guarantee. The Court was tasked to resolve a dispute initiated under Section 9 of the Arbitration and Conciliation Act, 1996 wherein the petitioner sought relief on the ground of \u201cspecial equities\u201d by highlighting the suspension of all industrial activities in light of the COVID-19 pandemic. <\/span><\/p>\n

The Court granted interim relief to the petitioner by interpreting the jurisprudence of the Supreme Court on the scope of judicial interference concerning the invocation, or encashment of unconditional bank guarantees. Pertinently, the Court analysed the decisions of the Supreme Court in U.P. Cooperative Federation Ltd. <\/i>v. Singh Consultants and Engineers (P) Ltd.<\/i>[2]<\/strong><\/a>, Svenska Handelsbanken <\/i>v. Indian Charge Chrome<\/i>[3]<\/strong><\/a>, Himadri Chemicals Industries Ltd. <\/i>v. Coal Tar Refining Co.<\/i>[4]<\/a><\/strong> and Standard Chartered Bank Ltd. <\/i>v. Heavy Engineering Corporation Ltd.<\/i>[5]<\/strong><\/a> amongst others to grant relief to the petitioner.<\/span><\/p>\n

The Supreme Court’s Jurisprudence\u00a0<\/b><\/span><\/p>\n

The Court in Halliburton Offshore Services Inc.<\/i>[6]<\/strong><\/a> had to place reliance upon a catena of Supreme Court judgments to interpret the scope and extent of judicial intervention in light of the COVID-19 pandemic.<\/span><\/p>\n

The Court placed reliance on a 1988 decision of the Supreme Court in U.P. Cooperative Federation Ltd.<\/i>[7]<\/strong><\/a> which identified special equities as a prima facie ground that would prevent irretrievable injustice between the parties. Furthermore, reliance was placed on a 1994 Supreme Court decision in Svenska Handelsbanken <\/i>[8]<\/strong><\/a> which clarified that irretrievable injustice would include irretrievable injury as conceptualised by a United States District Court decision in Itek Corporation <\/i>v. First National Bank of Boston<\/i>[9]<\/strong><\/a>. <\/i><\/span><\/p>\n

The ratio embodied by the Supreme Court in Itek Corporation <\/i>was clarified in a 1997 Supreme Court decision of U.P. State Sugar Corporation<\/i> v. Sumac International Ltd.<\/i>[10]<\/strong><\/a> wherein it was held that to avail of the exception of irreparable harm or injury, the party seeking relief would necessarily have to show exceptional circumstances which would make it impossible for the guarantor to reimburse himself in the event of succeeding in the main dispute. In other words, a case of irretrievable injury and\/or irreparable harm would have to be made out.<\/span><\/p>\n

Now, the threshold for special equities was further analysed by a 2007 decision of the Supreme Court in Himadri Chemicals Industries Ltd.<\/i>[11]<\/strong><\/a> which allowed the Supreme Court to once again lay down principles that would govern judicial intervention in granting injunctions for invoking unconditional bank guarantees. The Court laid down six principles for justifying judicial intervention and the most pertinent of which is:<\/span><\/p>\n

\n

\u201c…(vi) Allowing encashment of an unconditional bank guarantee or a letter of credit would result in irretrievable harm or injustice to one of the parties concerned.\u201d<\/i><\/span><\/p>\n<\/blockquote>\n

The principles laid down in Himadri Chemicals Industries Ltd.<\/i>[12]<\/strong><\/a> were once again relied upon in the 2016 Supreme Court decision of Gujarat Maritime Board <\/i>v. Larsen and Toubro Infrastructure Development Projects Ltd.<\/i>[13]<\/strong><\/a><\/span><\/p>\n

We now move to a recent 2019 decision of the Supreme Court in Standard Chartered <\/i>[14] <\/strong><\/a>where once again the Court analysed the settled principles of judicial intervention as laid down in Himadri Chemicals Industries Ltd.<\/i>[15]<\/strong><\/a> However, pertinently, the Court in Standard Chartered <\/i>held that: (SCC Online para 23)<\/span><\/p>\n

\n

\u201c23\u2026. <\/i>There are, however, exceptions to this rule when there is a clear case of fraud, irretrievable injustice or special equities<\/i>.<\/i><\/b>\u201d\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span><\/i><\/span><\/p>\n

(emphasis supplied)<\/span><\/p>\n<\/blockquote>\n

A plain reading of the holding of Standard Chartered Bank Ltd. <\/i>would indicate that the principles of special equities which cause irretrievable harm or justice are preserved. In other words, a circumstance necessitating special equities must be followed by the causation of irretrievable justice.<\/span><\/p>\n

The Delhi High Court’s Analysis\u00a0<\/b><\/span><\/p>\n

The Delhi High Court in Halliburton Offshore Services Inc. <\/i>has sought to alter the intent and scope of the Supreme Court\u2019s decision in Standard Chartered Bank Ltd.<\/i> by specifically holding that the Supreme Court in fact visualised irretrievable justice, and special equities, as distinct circumstances and therefore a presence of either would justify an order of injunction[16]<\/strong><\/a>. Pertinently, the Court has held that:<\/span><\/p>\n

\n

\u201c18. …All that is required to be seen is, therefore, whether \u201cspecial equities\u201d can be said to exist, as would justify grant of the relief sought by the petitioner.\u201d<\/i><\/span><\/p>\n<\/blockquote>\n

Now, in terms of the factual analysis in Halliburton Offshore Services Inc.<\/i>[17]<\/strong><\/a> the Court has in fact granted relief by relying upon both elements i.e. a circumstance necessitating special equities and the cause of irretrievable harm and injury. In this regard the Court has held that:<\/span><\/p>\n

\n

\u201c21. .. At the same time, if no interim protection is granted at this juncture, and the bank guarantees are allowed to be encashed, even while the lockdown is in place, in my view, the injury and prejudice that would result to the petitioner merits being categorized as irretrievable, even if, as Dr. Singhvi would suggest, the petitioner may still be able to recover the amounts, were it to succeed, finally, in arbitration.\u201d<\/i><\/span><\/p>\n<\/blockquote>\n

Therefore, we eventually see the Court applying both the elements of special equities and irretrievable harm and injury. Therefore, we see a strategic shift of the Court\u2019s analysis which holds that COVID-19 by itself necessitates the need for special equities but then decides the dispute by establishing a causal link of irretrievable harm as well. <\/span><\/p>\n

Pertinently, the Court does not engage with the submission of the contesting party that the petitioner is open to securing relief and recovery of the encashed bank guarantee through arbitration proceedings. In a rejection of this argument, the Court focuses on the unique nature of COVID-19 pandemic as a peculiar circumstance which necessitates judicial intervention in the interest of justice.<\/span><\/p>\n

Therefore, the interim order of the Court leaves us with an ambiguous interpretation of the Supreme Court\u2019s decision in Standard Chartered Bank Ltd.<\/i>[18]<\/strong> <\/a>which is the latest authority on the scope of judicial intervention in restraining an invocation of unconditional bank guarantees. <\/span><\/p>\n

Conclusion<\/b><\/span><\/p>\n

Therefore, the interim order of the Court in Halliburton Offshore Services Inc. <\/i> is open to scrutiny and challenge as its reasoning stems from an unordinary reading of the Supreme Court\u2019s jurisprudence with specific reference to the decision of Standard Chartered Bank Ltd. <\/i>The Court\u2019s order may spark ambiguity with respect to special equities as a ground to intervene and restrain an invocation of an unconditional bank guarantee.<\/span><\/p>\n

\n

*<\/strong>The author is a practicing advocate at the Supreme Court of India, Delhi High Court and various tribunals including the NCLT and NCLAT. He is currently practicing as a Counsel with Chamber 20A of the Supreme Court of India. He has read law at Jindal Global Law School. The author can be reached via e-mail on jaideepkhanna@chamber20a.com<\/span> and via LinkedIn on www.linkedin.com\/in\/jaideep-khanna-221b9018a<\/span><\/a>.<\/span><\/p>\n

[1]<\/a> 2020 SCC OnLine Del 542<\/a><\/span><\/p>\n

[2]<\/a> (1994) 1 SCC 502<\/a>\u00a0<\/span><\/p>\n

[3]<\/a> (2007) 8 SCC 110<\/a>\u00a0<\/span><\/p>\n

[4]<\/a> 2019 SCC OnLine SC 1638<\/a><\/span><\/p>\n

[5]<\/a> Halliburton Offshore Services Inc. v. Vedanta Ltd., 2020 SCC OnLine Del 542<\/a><\/span><\/p>\n

[6]<\/a> U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd., (1988) 1 SCC 174<\/a><\/span><\/p>\n

[7]<\/a> Svenska Handelsbanken v. Indian Charge Chrome, (1994) 1 SCC 502<\/a><\/span><\/p>\n

[8]<\/a> 566 Fed Supp 1210<\/span><\/p>\n

[9]<\/a> (1997) 1 SCC 568<\/a>\u00a0<\/span><\/p>\n

[10]<\/a> Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co.,<\/i> (2007) 8 SCC 110<\/a><\/span><\/p>\n

[11]<\/a> Ibid<\/p>\n

[12]<\/a> (2016) 10 SCC 46<\/a><\/span><\/p>\n

[13]<\/a> Standard Chartered Bank Ltd. <\/span>v. <\/span>Heavy Engineering Corporation Ltd., 2019 SCC OnLine SC 1638<\/a><\/span><\/p>\n

[14]<\/a> (2007) 8 SCC 110<\/span><\/a><\/p>\n

[15]<\/a> 2020 SCC OnLine Del 542<\/a> para 17<\/span><\/p>\n

[16]<\/a> 2020 SCC OnLine Del 542<\/span><\/a><\/p>\n

[17]<\/a> 2019 SCC OnLine SC 1638<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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The entire case of the respondent fails to qualify\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Allahabad High Court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/11\/MicrosoftTeams-image31.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":367021,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/11\/18\/the-rare-case-of-special-equities-in-arbitration\/","url_meta":{"origin":228746,"position":1},"title":"The Rare Case of Special Equities in Arbitration","author":"Editor","date":"November 18, 2025","format":false,"excerpt":"by Sugandh Kochhar* and Sohini Mukerjee**","rel":"","context":"In "Op Eds"","block_context":{"text":"Op Eds","link":"https:\/\/www.scconline.com\/blog\/post\/category\/op-ed\/legal-analysis\/"},"img":{"alt_text":"Special Equities in Arbitration","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/11\/Special-Equities-in-Arbitration.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/11\/Special-Equities-in-Arbitration.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/11\/Special-Equities-in-Arbitration.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/11\/Special-Equities-in-Arbitration.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":26391,"url":"https:\/\/www.scconline.com\/blog\/post\/2015\/11\/18\/invocation-of-bank-guarantee-can-be-restrained-only-if-there-is-existence-of-fraud-irretrievable-injuryinjustice-or-special-equities\/","url_meta":{"origin":228746,"position":2},"title":"Invocation of bank guarantee can be restrained only if there is existence of fraud, irretrievable injury\/injustice or special equities","author":"Sucheta","date":"November 18, 2015","format":false,"excerpt":"Delhi High Court: While deciding a crucial matter relating to work contracts and\u00a0 bank guarantee the Division Bench comprising of Sanjeev Sachdeva and B.D. Ahmed JJ., observed that invocation of a bank guarantee cannot be restrained unless fraud, irretrievable injury\/injustice or special equities is proved. In the present case, the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":284135,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/02\/16\/court-cannot-interfere-with-enforcement-of-bank-guarantee-except-only-in-cases-where-fraud-or-special-equity-is-prima-facie-made-out-to-prevent-irretrievable-injustice-delhi-high-court-legal-researc\/","url_meta":{"origin":228746,"position":3},"title":"Court cannot interfere with the enforcement of a bank guarantee except cases where fraud or special equity is prima facie made out so as to prevent irretrievable injustice: Delhi High Court","author":"Editor","date":"February 16, 2023","format":false,"excerpt":"A Single Judge Bench of Chandra Dhari Singh, J. disposed of the petition and restrained from invoking\/encashing the bank guarantee.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Delhi High Court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image-418.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":258913,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/12\/23\/cal-hc-circumventing-invocation-of-bank-guarantee-justified-in-matters-of-irretrievable-injustices-and-special-equities-court-rejects-application\/","url_meta":{"origin":228746,"position":4},"title":"Cal HC | “Circumventing invocation of Bank Guarantee justified in matters of irretrievable injustices and special equities”: Court rejects application","author":"Editor","date":"December 23, 2021","format":false,"excerpt":"Calcutta High Court: Moushami Bhatacharya J., while rejecting vacating application of an order of injunction on Yes Bank held that \"an unconditional bank guarantee results in an absolute obligation on the part of a bank to pay but there are exceptions to this rule namely, fraud which would vitiate the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":331935,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/09\/27\/del-hc-quashes-award-arbitral-tribunal-to-injunct-invocation-bank-guarantees-special-equities-irretrievable-injustice\/","url_meta":{"origin":228746,"position":5},"title":"\u2018Special equities have to partake the character of irretrievable injustice\u2019; 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