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MOUSHUMI BHATTACHARYA
KSE Electricals Pvt. Ltd. – Appellant
Versus
Project Director, Bangladesh Rural Electrification Board – Respondent
JUDGMENT :
(Moushumi Bhattacharya, J.)
1. The issue which falls for consideration in the present case is the ground on which invocation of a bank guarantee can be restrained.
2. By an order dated 10th May, 2021 a learned Single Judge restrained the respondent No. 2 from making any payment under a bank guarantee invoked by the respondent No. 1. The said order was modified on 18th May, 2021 by another Learned Judge confirming the interim order of injunction and further restraining the respondent No. 1 from encashing the bank guarantee. The letter of invocation was stayed and the petitioner was given the liberty of producing a copy of the order before the respondent No. 2 in their seats at Kolkata and Dhaka. The petitioner and the respondent No. 2 have filed their respective affidavits thereafter. The respondent No. 1 has however not contested in the proceedings and has not challenged or responded to the orders of injunction by way of affidavit or otherwise. These orders were passed in the present application filed by the petitioner under Section 9 of The Arbitration and Conciliation Act, 1996.
3. A brief background of the facts is necessary for a better understanding of what brought the
Invocation of an unconditional bank guarantee cannot be restrained unless fraud or irretrievable injustice is established; the nature of bank guarantees is independent and absolute.
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....
The court emphasized the independence and unconditional nature of bank guarantees, while recognizing exceptions such as fraud, irretrievable injustice, or special equities.
A confirmed Bank Guarantee/irrevocable Letter of Credit cannot be interfered with unless there is established fraud or irretrievable injustice involved in case.
A party seeking to restrain the invocation of a bank guarantee must demonstrate either clear fraud or irretrievable injustice; mere contractual disputes do not suffice for injunctions.
Bank guarantees can be invoked regardless of disputes, unless fraud or irretrievable harm is clearly established.
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