Irrevocable bank guarantees are independent contracts governed by their own terms, and disputes relating to the underlying contract cannot be grounds for restraining payment under a bank guarantee unless exceptional circumstances, such as fraud or irretrievable injustice, are established.

1. The Court: The principal prayer made in this petition under section 9 of the Arbitration and Conciliation Act, 1996 is for an injunction restraining the respondent from invoking or receiving payments under three several bank guarantees furnished in connection with a contract for setting up a power plant in Raigarh. There is an incidental prayer in the nature of attachment before judgment.

2. The arbitration clause is not in dispute. Upon leave under Clause 12 of the Letters Patent having been granted on July 6, 2012, it was submitted on behalf of the respondent that it had an objection to the authority of this Court to entertain the petition. The objection has not been elaborated upon today. On July 6, 2012, the respondent had, however, been gracious enough to not insist on immediate payment from the bank since the matter could not have been conveniently concluded on that date. The concession recorded in the order dated July 6, 2012, however, did not create any equity in favour of the petitioner nor did it bind the respondent to abide thereby beyond the time that the matter was due to be taken up in Court. The respondent says that the bank guarantees have been invoked but the payment has not yet been received. There will be no impediment to the payment under the three several bank guarantees being received and the bank or banks are left free to make payment thereunder.

3. A letter of award was issued for the design, supply, erection and commission of the two 600 MW units of the proposed power plant. Four several contracts were entered into by the parties on December 7, 2011 for the supply of machinery, construction of the plant, supply of raw material and the commissioning of the units. The case made out by the petitioner is that notwithstanding the agreement envisaging regular payments to be made on 30-day after basis following the running bills being of the petitioner being submitted, the respondent has failed to adhere to the payment schedule and the respondent has subsequently sought to modify the scope of the work as originally contemplated.

4. The petitioner demonstrates from the correspondence exchanged between the parties that payments in accordance with the agreed terms were not tendered by the respondent. The petitioner refers to the minutes of several meetings held between the representatives of the parties from which it is evident that the respondent sought time to make payment and only made part payments of the long overdue amounts. It appears to be fairly clear on the basis of the documents relied upon, that the petitioner has a substantial claim. The petitioner insists that bills of value in excess of Rs.141 crore have been certified for payment by the respondent. The respondent disputes such figure but it does not appear that the amount covered by the bills already raised and not paid for by the respondent is insubstantial.

5. The petitioner refers to the minutes of a meeting held on December 8, 2011, whereat the respondent admitted that a substantial amount remained due to the petitioner. In letters exchanged thereafter, it is evident that the petitioner claimed by January 14, 2012 that a sum in excess of Rs.76 crore was due in respect of the certified bills. The petitioner stresses on a letter dated January 19, 2012 issued by the respondent. It is evident from such letter that a financial tie-up had been completed by the respondent under which it was to obtain credit facilities from one or more banks. The petitioner says that in the respondent agreeing to release funds within thirty days of the bills being raised therefor by the petitioner, and in the respondent not having funds available to honour such commitment, the respondent had perpetrated fraud in inducing the petitioner to enter into an arrangement without believing that the respondent could honour its part of the bargain therein. The petitioner insists that the conduct of the respondent would amount to the fraud of the kind that would entitle