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N. J. JAMADAR
Axis Bank – Appellant
Versus
Bank Of Baroda – Respondent
JUDGMENT
1. This commercial division summary suit is instituted for recovery of a sum of Rs.8,56,00,000.00 alongwith interest at the rate of 17.40% p.a. from 26/2/2018, the date the bank guarantees, which form the basis of the suit, were invoked.
2. The plaintiff and defendant are the banking companies. Initial transaction was between the plaintiff and Vijaya Bank, which merged with the defendant, under an amalgamation scheme with effect from 1/4/2019.
3. The material averments in the plaint can be summarised as under:
(a) On 9/11/2016, the plaintiff had sanctioned a Gold Metal Loan to the tune of Rs.100.00 Crores to M/s. Nakshatra Brand Ltd. (M/s. Nakshatra) in accordance with terms and conditions incorporated therein. One of the term was that M/s. Nakshatra would secure the loan by furnishing a Bank Guarantee covering 110% margin of the limit under the loan. At the request of M/s Nakshatra on 15/5/2017 the defendant Viajaya Bank, issued Bank Guarantee No.51011BGIS170040, for or a sum of Rs.2,83,00,000.00 towards security of the gold loan sanctioned by the plaintiff equivalent to the notional international price of 10 kg. gold to M/s. Nakshtra. The issuance of the said bank guarantee
The Court held that the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees and that there was no case for interdicting invocation of the bank guarantees.....
The invocation of an unconditional bank guarantee can only be interdicted in exceptional circumstances, such as egregious fraud, irretrievable injustice, or special equities.
Point of Law : It is trite law that a Court can restrain encashment of bank guarantee in cases of established fraud in invocation of bank guarantee. The fraud has to be absolute and egregious, vitiat....
Bank guarantees are independent contracts and should be honored as per their terms, and any dispute between the parties does not affect the invocation of the bank guarantee.
Bank guarantees must be honored by the bank unless established fraud or irreparable harm exists; courts must avoid granting injunctions against their encashment.
Bank guarantees are independent and unconditional contracts, and courts should refrain from interfering with their invocation unless exceptional circumstances such as fraud or irretrievable injury ar....
A confirmed Bank Guarantee/irrevocable Letter of Credit cannot be interfered with unless there is established fraud or irretrievable injustice involved in case.
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