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1 - 10 of 10 (0.61 seconds)Vishal Engineers & Builders vs Indian Oil Corporation Limited on 30 October, 2011
In view of the above, the judgments in Shree Rameshwara Rice Mills
(Supra) and Vishal Engineers (Supra) relied upon by the learned counsel
for the petitioner, would not be applicable to the facts of the present case.
Both these judgments were not dealing with a case of bank guarantee but
with contractual rights of the party under the principal agreement. As held
OMP (I) (COMM.) 328/2018 & 329/2018 Page 11
by the Supreme Court, Bank Guarantee being an independent agreement, is
to be governed by its own terms.
Dwarikesh Sugar Industries Ltd vs Prem Heavy Engineeing Work on 7 May, 1997
In Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering
Works (P) Ltd,. (1997) 6 SCC 450, Supreme Court reiterated this law as
under:
Svenska Handelsbanken vs Indian Charge Chrome (Dayal, J.) on 15 October, 1993
"21. Numerous decisions of this Court rendered over a
span of nearly two decades have laid down and
reiterated the principles which the courts must apply
while considering the question whether to grant an
injunction which has the effect of restraining the
encashment of a bank guarantee. We do not think it
necessary to burden this judgment by referring to all of
them. Some of the more recent pronouncements on this
point where the earlier decisions have been considered
and reiterated are Svenska Handelsbanken v. Indian
Charge Chrome [(1994) 1 SCC 502] , Larsen & Toubro
Ltd. v. Maharashtra SEB [(1995) 6 SCC 68] , Hindustan
Steel Workers Construction Ltd. v. G.S. Atwal & Co.
(Engineers) (P) Ltd.[(1995) 6 SCC 76] and U.P. State
Sugar Corpn. v. Sumac International Ltd. [(1997) 1
SCC 568] The general principle which has been laid
down by this Court has been summarised in the case
of U.P. State Sugar Corpn. [(1997) 1 SCC 568] as
follows: (SCC p. 574, para 12)
"The law relating to invocation of such bank guarantees
OMP (I) (COMM.) 328/2018 & 329/2018 Page 5
is by now well settled. When in the course of commercial
dealings an unconditional bank guarantee is given or
accepted, the beneficiary is entitled to realize such a
bank guarantee in terms thereof irrespective of any
pending disputes. The bank giving such a guarantee is
bound to honour it as per its terms irrespective of any
dispute raised by its customer. The very purpose of
giving such a bank guarantee would otherwise be
defeated. The courts should, therefore, be slow in
granting an injunction to restrain the realization of such
a bank guarantee. The courts have carved out only two
exceptions. A fraud in connection with such a bank
guarantee would vitiate the very foundation of such a
bank guarantee. Hence if there is such a fraud of which
the beneficiary seeks to take the advantage, he can be
restrained from doing so. The second exception relates
to cases where allowing the encashment of an
unconditional bank guarantee would result in
irretrievable harm or injustice to one of the parties
concerned. Since in most cases payment of money under
such a bank guarantee would adversely affect the bank
and its customer at whose instance the guarantee is
given, the harm or injustice contemplated under this
head must be of such an exceptional and irretrievable
nature as would override the terms of the guarantee and
the adverse effect of such an injunction on commercial
dealings in the country."
U.P. State Sugar Corporation vs M/S. Sumac International Ltd on 4 December, 1996
"21. Numerous decisions of this Court rendered over a
span of nearly two decades have laid down and
reiterated the principles which the courts must apply
while considering the question whether to grant an
injunction which has the effect of restraining the
encashment of a bank guarantee. We do not think it
necessary to burden this judgment by referring to all of
them. Some of the more recent pronouncements on this
point where the earlier decisions have been considered
and reiterated are Svenska Handelsbanken v. Indian
Charge Chrome [(1994) 1 SCC 502] , Larsen & Toubro
Ltd. v. Maharashtra SEB [(1995) 6 SCC 68] , Hindustan
Steel Workers Construction Ltd. v. G.S. Atwal & Co.
(Engineers) (P) Ltd.[(1995) 6 SCC 76] and U.P. State
Sugar Corpn. v. Sumac International Ltd. [(1997) 1
SCC 568] The general principle which has been laid
down by this Court has been summarised in the case
of U.P. State Sugar Corpn. [(1997) 1 SCC 568] as
follows: (SCC p. 574, para 12)
"The law relating to invocation of such bank guarantees
OMP (I) (COMM.) 328/2018 & 329/2018 Page 5
is by now well settled. When in the course of commercial
dealings an unconditional bank guarantee is given or
accepted, the beneficiary is entitled to realize such a
bank guarantee in terms thereof irrespective of any
pending disputes. The bank giving such a guarantee is
bound to honour it as per its terms irrespective of any
dispute raised by its customer. The very purpose of
giving such a bank guarantee would otherwise be
defeated. The courts should, therefore, be slow in
granting an injunction to restrain the realization of such
a bank guarantee. The courts have carved out only two
exceptions. A fraud in connection with such a bank
guarantee would vitiate the very foundation of such a
bank guarantee. Hence if there is such a fraud of which
the beneficiary seeks to take the advantage, he can be
restrained from doing so. The second exception relates
to cases where allowing the encashment of an
unconditional bank guarantee would result in
irretrievable harm or injustice to one of the parties
concerned. Since in most cases payment of money under
such a bank guarantee would adversely affect the bank
and its customer at whose instance the guarantee is
given, the harm or injustice contemplated under this
head must be of such an exceptional and irretrievable
nature as would override the terms of the guarantee and
the adverse effect of such an injunction on commercial
dealings in the country."
State Of Karnataka Etc vs Shri Rameshwara Rice Mills ... on 24 February, 1987
In view of the above, the judgments in Shree Rameshwara Rice Mills
(Supra) and Vishal Engineers (Supra) relied upon by the learned counsel
for the petitioner, would not be applicable to the facts of the present case.
Both these judgments were not dealing with a case of bank guarantee but
with contractual rights of the party under the principal agreement. As held
OMP (I) (COMM.) 328/2018 & 329/2018 Page 11
by the Supreme Court, Bank Guarantee being an independent agreement, is
to be governed by its own terms.
Gujarat Maritime Board vs L&T; Infrastructure Development ... on 28 September, 2016
In Gujarat Maritime Board v. Larsen and Toubro Infrastructure
Development Projects Limited and Anr., (2016) 10 SCC 46, the Supreme
Court once again cautioned that bank guarantee is a separate contract and is
not qualified by the contract under which it is given. Whether the
cancellation was just and proper is a question to be decided by the Arbitrator
and not by this Court under Section 9 of the Act. I would only quote the
relevant paragraphs of the said Judgment:
Himadri Chemicals Industries Ltd vs Coal Tar Refining Company on 7 August, 2007
In Himadri Chemicals Industries
Ltd. v. Coal Tar Refining Co. [Himadri Chemicals
Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC
110] , at para 14: (SCC pp. 117-18)
"14. From the discussions made hereinabove
relating to the principles for grant or refusal to
grant of injunction to restrain enforcement of a
OMP (I) (COMM.) 328/2018 & 329/2018 Page 8
bank guarantee or a letter of credit, we find that
the following principles should be noted in the
matter of injunction to restrain the encashment of
a bank guarantee or a letter of credit:
Classic-Ksm Bashir Jv vs Rites Limited & Ors. on 4 May, 2018
11. Recently this Court in M/s. Classic Ksm Bashir JV vs. Rites Ltd. &
Ors., 2018 SCC OnLine Del 9056 rejected the argument of the appellant
therein that incase of undetermined or inchoate sums claimed by the
principal on account of damages, performance guarantee cannot be invoked
at all. It was held that this would be too broad a proposition to be accepted.
The bank guarantee being an independent contract, is to be governed by its
own terms. Paragraph 10 of the judgment is quoted hereinunder:-
U.P. Co-Operative Federation Ltd vs Singh Consultants & Engineers (P) Ltd on 19 November, 1987
(emphasis supplied)
The aforesaid passage was approved and followed by
this Court in U.P. Coop. Federation Ltd. v. Singh
Consultants and Engineers (P) Ltd. [(1988) 1 SCC 174]
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