{"id":258913,"date":"2021-12-23T13:00:39","date_gmt":"2021-12-23T07:30:39","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=258913"},"modified":"2021-12-24T10:04:40","modified_gmt":"2021-12-24T04:34:40","slug":"cal-hc-circumventing-invocation-of-bank-guarantee-justified-in-matters-of-irretrievable-injustices-and-special-equities-court-rejects-application","status":"publish","type":"post","link":"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\/","title":{"rendered":"Cal HC | &#8220;Circumventing invocation of Bank Guarantee justified in matters of irretrievable injustices and special equities&#8221;: Court rejects application"},"content":{"rendered":"<p style=\"text-align: justify;\"><strong>Calcutta High Court:<\/strong> Moushami Bhatacharya J., while rejecting vacating application of an order of injunction on Yes Bank held that <em>&#8220;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 very foundation of a bank guarantee; irretrievable injustice and special equities which forms the core of bonafide transactions.&#8221;<\/em><\/p>\n<p style=\"text-align: justify;\">KSE (petitioner in the section 9 application) had entered into a contract with Bangladesh Rural Electrification Board (respondent 1). KSE submitted a performance guarantee in terms of the contract issued by Eastern Bank covering 10% of the contract value. Yes Bank gave a counter guarantee to Eastern Bank for and on behalf of KSE to secure Eastern Bank, Dhaka. KSE filed the application under section 9 of the 1996 Act upon receipt of a letter from the respondent 1 calling upon the petitioner KSE to deposit USD 10,385 and BDT 20,06,754 with a threat of invocation of the performance guarantee. The petitioner paid the aforesaid amount to the respondent 1. The case of KSE was that the respondent 1 wrongfully withheld 10% of the contract value as retention amount and refused to release the performance guarantee. The urgency shown was also on account of a notice from Eastern Bank informing KSE of a request made by the respondent 1 to Eastern Bank to encash the bank guarantee.<\/p>\n<p style=\"text-align: justify;\">The applicants main points of contention evolved around the fact that the counter guarantee issued by the applicant was irrevocable in nature and was a separate contract and that the injunction should be vacated since Eastern Bank had already made payment to the respondent 1 upon invocation of the bank guarantee. Moreover, KSE\u2019s counter arguments to the challenge of jurisdiction by Yes Bank revealed that there was no forum selection clause in the contract, invoking this court&#8217;s jurisdiction according to Section 2(1) (e) (ii) of The Arbitration and Conciliation Act, 1996.<\/p>\n<p style=\"text-align: justify;\">The Court relied upon the decision of the Supreme Court in <em>Hindustan Steelworks Construction Ltd. v. Tarapore &amp; Co<\/em>., (1996) 5 SCC 34; <em>U.P. State Sugar Corporation v. Sumac International Ltd.,<\/em> (1997) 1 SCC 568, while establishing that the bank guarantees could be withheld\u00a0 in circumstances relating to fraud, gross inequities and extreme injustices on one party. It also established its jurisdiction by quoting the Supreme Court in <em>Hardy Oil &amp; Gas Ltd. v. Hindustan Oil Exploration Company Ltd.,<\/em> 2005 SCC Online Guj 250; <em>Reliance Industries Ltd. v. Union of India<\/em>, (2014) 7 SCC 603, stating that <em>&#8220;the Arbitration Agreement in the present case does not indicate a place or a seat which have a bearing on the law applicable to the arbitration proceedings.&#8221;<\/em><\/p>\n<p style=\"text-align: justify;\">Thus, the Court rejected the application.[KSE Pvt. Ltd v. Project Director, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/NAzj9zze\"><b>2021 SCC OnLine Cal 2986<\/b><\/a>, decided on 23-11-2021]<\/p>\n<hr \/>\n<h4><span style=\"color: #993300;\">Suchita Shukla, Editorial Assistant has reported this brief.<\/span><\/h4>\n<hr \/>\n<p style=\"text-align: justify;\">Appearances:<\/p>\n<p style=\"text-align: justify;\">For the Petitioner:\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Mr Sabyasachi Chowdhury, Sr. Adv.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Mr Rajarshi Dutta, Adv.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Mr V. V. V. Sastry, Adv.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Mr Tridib Bose, Adv.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Mr Debjyoti Saha, Adv.<\/p>\n<p style=\"text-align: justify;\">For the Respondent 2:\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0Ms Suchismita Chatterjee, Adv.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Mr Malay Kumar Seal, Adv.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Calcutta High Court: Moushami Bhatacharya J., while rejecting vacating application of an order of injunction on Yes Bank held that &#8220;an unconditional <\/p>\n","protected":false},"author":67011,"featured_media":52131,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[],"class_list":["post-258913","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cal HC | 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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 &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":367021,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/11\/18\/the-rare-case-of-special-equities-in-arbitration\/","url_meta":{"origin":258913,"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 &quot;Op Eds&quot;","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":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":258913,"position":2},"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 &quot;Case Briefs&quot;","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":228746,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/04\/25\/special-equities-in-light-of-covid-19-and-its-impact-on-invoking-bank-guarantees\/","url_meta":{"origin":258913,"position":3},"title":"\u201cSpecial Equities\u201d in light of COVID-19 and its impact on invoking Bank Guarantees","author":"Bhumika Indulia","date":"April 25, 2020","format":false,"excerpt":"by Jaideep Khanna*","rel":"","context":"In &quot;Op Eds&quot;","block_context":{"text":"Op Eds","link":"https:\/\/www.scconline.com\/blog\/post\/category\/op-ed\/legal-analysis\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/04\/vedanta.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/04\/vedanta.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/04\/vedanta.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/04\/vedanta.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/04\/vedanta.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":280309,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/12\/23\/allahabad-high-court-reiterates-law-on-interdicting-unconditional-bank-guarantee-sets-aside-interim-injunction-order-passed-by-commercial-court-legal-researcg-legal-news-updates\/","url_meta":{"origin":258913,"position":4},"title":"Allahabad High Court reiterates law on interdicting unconditional bank guarantee; Sets aside interim injunction order passed by Commercial Court","author":"Editor","date":"December 23, 2022","format":false,"excerpt":"Fraud, as an exception to the rule of non-interference with encashment of bank guarantees, is not any fraud, but a fraud of an egregious nature, going to the root i.e., to the foundation of the bank guarantee and an established fraud. The entire case of the respondent fails to qualify\u2026","rel":"","context":"In &quot;Case Briefs&quot;","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":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":258913,"position":5},"title":"\u2018Special equities have to partake the character of irretrievable injustice\u2019; Delhi HC quashes award by Arbitral Tribunal to injunct invocation of Bank Guarantees","author":"Editor","date":"September 27, 2024","format":false,"excerpt":"\u2018The person at whose instance a Bank Guarantee has been issued by the bank is not a party to it and is merely a benefactor from whose account the payment would be realized.\u2019","rel":"","context":"In &quot;Case Briefs&quot;","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\/2024\/02\/Delhi-High-Court.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/Delhi-High-Court.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/Delhi-High-Court.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/02\/Delhi-High-Court.webp?resize=700%2C400&ssl=1 2x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/258913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67011"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=258913"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/258913\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/52131"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=258913"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=258913"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=258913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}