The court emphasized the independence of bank guarantees and the limited scope of exceptions of fraud and irretrievable injustice, requiring clear evidence of egregious fraud vitiating the guarantee's foundation.

S.C. GUPTE, J.

1. The arbitration petition, filed under Section 9 of the Arbitration and Conciliation Act, 1996, seeks an interim injunction against enforcement of bank guarantees. The disputes between the parties arise out of two contracts, one for supply of materials and the other for supply of labour for construction of compound wall at stack yard of a birth in the Port of Visakhapatnam. The two bank guarantees, which are sought to be invoked by Respondent No.1, and invocation of which is sought to be restrained herein, are performance bank guarantees furnished under these contracts.

2. The contracts required each of the bank guarantees to be for an amount of 10% of the contract value and valid for a period of 12 months, guaranteeing due performance of the contract. The contracts, which are in identical terms in material respects, inter alia provided for (i) completion period and certificate to be issued on completion of work, (ii) defects liability period of 18 months from such certified completion date, and (iii) a final completion certificate at the end of successful completion of the defects liability period. The contracts further provided for enforcement of the performance guarantees inter alia for the Petitioner's failure to perform obligations in accordance with the contracts and upon the occurrence of specified events including failure to remedy the defects. The guarantees were to be enforceable without any requirement to place any demand on the Petitioner for any amount and notwithstanding any dispute between the parties in respect of the alleged default.

3. The Petitioner submitted the suit bank guarantees in pursuance of the contracts through Respondent No.2 bank, unconditionally and irrevocably guaranteeing to pay to Respondent No.1 the amounts not exceeding the sums mentioned therein "against any loss or damage caused to or suffered or would be caused to or suffered by the client by reason of any breach by the contractor of any of the terms and conditions contained in the 'LOA'.” The bank undertook to pay the amounts without demur "merely on a demand from the client stating that the amount claimed is due by way of loss or damage" by such reason.

4. It is the Petitioner's case that around July 2014, the Petitioner satisfactorily completed the work, such completion being acknowledged by Respondent No.1 in an experience certificate; that there had been no complaint about the performance either in terms of time of completion or quality; that yet on 7 April 2015 Respondent No.1 addressed two separate letters alleging breach on the part of the Petitioner of the terms of the respective LOAs and loss caused to the former thereby; and that on the same day, i.e. 7 April 2015, the Petitioner received an intimation from Respondent No.2 bank about invocation of the bank guarantees by Respondent No.1. It is the case of the Petitioner that the invocation is not only wrongful but fraudulent, causes irretrievable injustice to the Petitioner, and is liable to be interfered with by this Court pending the arbitration reference, since these disputes are covered under the arbitration agreement between the parties. It is submitted by the Petitioner that the invocation is nothing but a counter blast to the proceeding filed by the Petitioner against Respondent No.1 seeking injunctive reliefs in respect of another contract between the parties, where the Petitioner has exposed the dishonesty of Respondent No.1 in a statement made by the latter before this Court.

5. The law concerning invocation of, and payment under, a bank guarantee is now well settled and hardly admits of any ambiguity or doubt. A bank guarantee is an independent contract between the bank and the beneficiary thereof. Irrespective of any dispute between the beneficiary and the party at whose instance the bank guarantee is furnished, the bank is obliged to honour the guarantee, if such guarantee is unconditional and irrevocable. As long as the invocation is in acco