{"id":26391,"date":"2015-11-18T10:38:52","date_gmt":"2015-11-18T05:08:52","guid":{"rendered":"http:\/\/www.scconline.com\/blog\/?p=26391"},"modified":"2015-11-27T15:06:52","modified_gmt":"2015-11-27T09:36:52","slug":"invocation-of-bank-guarantee-can-be-restrained-only-if-there-is-existence-of-fraud-irretrievable-injuryinjustice-or-special-equities","status":"publish","type":"post","link":"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\/","title":{"rendered":"Invocation of bank guarantee can be restrained only if there is existence of fraud, irretrievable injury\/injustice or special equities"},"content":{"rendered":"<p style=\"text-align: justify;\"><strong>Delhi High Court: <\/strong>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 petitioner had issued a letter of intent to the respondent no. 1 for construction of a power project. The respondent no. 1 in response gave a bank guarantee. The petitioner had invoked the bank guarantee alleging the respondent no. 1 failed to act according to terms of the contract. The Single Judge had restrained encashment of this bank guarantee under Section 9 of the Arbitration and Conciliation Act, 1996 as per a plea filed by the respondent no. 1. The order of restraint was challenged in front the High Court in view of the settled legal principles governing bank guarantees.<\/p>\n<p style=\"text-align: justify;\">The Court observed \u2018The petition under section 9 was filed after the Bank Guarantee was invoked and as such, the contract of guarantee had come into operation. The Respondent no. 1 in the petition under Section 9 of the Act has not even raised a plea of fraud leave alone aver facts to establish the plea of fraud. There is not even the plea of \u201cirretrievable injury\u201d or \u201cirretrievable injustice\u201d. The respondent no. 1 has not even pleaded \u201cspecial equities\u201d. The respondent no. 1 apart from raising disputes on merits has merely stated that \u201cthe petitioner would be highly prejudiced if the Bank Guarantee is invoked and the properties are alienated as the petitioner has a prima facie case and is likely to succeed in the Arbitration\u201d and \u201cthat the petitioner would in fact, suffer irreparable loss, in case the reliefs prayed for are not granted\u201d. Since none of the three mandatory pleas, fraud, irretrievable injury\/injustice or special equities has been pleaded, the respondent no. 1 is not entitled to any order of restraint from invocation of bank guarantee. The unconditional bank guarantee has been provided in the course of commercial dealings. The appellant is entitled to realize the bank guarantee in terms thereof irrespective of any pending dispute. The respondent no. 2\/bank is bound to honour the bank guarantee as per its terms irrespective of any dispute raised by its customer\/the respondent no. 1. Otherwise, the very purpose of giving such a bank guarantee would be defeated. The existence of any dispute between the appellant and respondent no. 1 with regard to the underlying contract cannot be a ground for issuing an injunction to restrain the enforcement of the bank guarantee.\u2019\u00a0<em>[<\/em><em>Zillion Infra Projects (P) Ltd. v. Fab-Tech Works &amp; Constructions Pvt. Ltd.,\u00a0\u00a0\u00a0<\/em><a href=\"http:\/\/www.scconline.com\/LoginForNewsLink\/2015_SCC_OnLine_Del_13163\">2015 SCC OnLine Del 13163<\/a><em>,\u00a0<\/em><em>decided on 2-11-2015]<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Delhi High Court: While deciding a crucial matter relating to work contracts and\u00a0 bank guarantee the Division Bench comprising of Sanjeev Sachdeva <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[3981,3991],"class_list":["post-26391","post","type-post","status-publish","format-standard","hentry","category-casebriefs","category-highcourts","tag-bank-guarantee","tag-work-contract"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ 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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 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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":"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 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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":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":26391,"position":3},"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":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":26391,"position":4},"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":261379,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/02\/09\/if-the-party-is-able-to-make-out-an-exceptional-case-and-the-court-finds-irretrievable-injustice-would-occur-if-writ-jurisdiction-is-not-invoked\/","url_meta":{"origin":26391,"position":5},"title":"Chh HC | If the party is able to make out an exceptional case and the court finds irretrievable injustice would occur if writ jurisdiction is not invoked, High Courts do have the power to entertain the writ petition","author":"Editor","date":"February 9, 2022","format":false,"excerpt":"Chhattisgarh High Court: Sam Koshy J. partly allowed the petition and partly disposed of the petition expressing no opinion on the termination notice issued against the petitioner. 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