( 1 ) THESE are six applications (I. A. 4316/82 in Suit No. 1392-A/81, I. A. 3302/81 in Suit No. 1090-A/81, I. A. in Suit No. 1091-A/81, I. A. No. 1093/81, A. I. 3020/31 in Suit No. 852/81 and I. A. 3371/81 in Suit No. 1108/81) under Section 41 read with Schedule 1 of the Arbitration Act. 1940 and Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, in six different petitions u/s 20 of the Arbitration Act and raise common questions as to the nature of the obligation of a bank under a bank guarantee or performance guarantee, the legal incidents of such a guarantee and the extent to which a Court may interfere in the payment of the amount which the bank has bound itself to do, during the pendency of a reference of the disputes under the primary agreement to arbitration or of the arbitration proceedings pursuant to it.

( 2 ). The primary contracts, containing the arbitration clause, in cases of 1. Ass. 3302, 3303, 3312, 3020 and 3371 of 1981, were entered into between Uppal Engineering Construction Company Pvt. Ltd , and the Central Warehousing Corporation. The Primary contract in the case of I. A. 4316/81, containing the arbitration clause, was entered into between Banwari Lal Radhey Mohan and the Punjab State Co-operative supply and Marketing Federation guarantees in all these cased are in almost indentical terms and contain in unequivocal terms, an undertaking to pay without any demur merely on demand from the respondents stating that the amount claimed was due and payable by way of loss or damages caused to or would be caused to or suffered by the respondents by reason of any breach of the petitioners to perform the agreement. It is further stipulated that any demand made on the bank shall be conclusive as regards the amount due and payable by the the bank under this guarantee.

( 3 ) THE first question is as to the nature of the obligation of the bank under these guarantees and as to their legal incidents. It is well settled that the performance guarantees or performance bonds, a comparatively recent specie of Banker s commercial credit, variously described as a new type of commercial credit or "a new business transaction" or "a new creature", and "the life blood of international commerce" has many similaries to a letter of crenit and stand on a similar footing to a letter of credit. Such guarantees, even through having their genesis in the primary contract between the parties, are nevertheless autonomous" and independents contracts and a bank which gives a performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and the customer, nor with the question whether the supplier has performed his contracted obligations or not, nor with the question whether the supplier has performed his contracted obligations or not, nor with the default or not and the only exception is when there is a clear fraud, of which the bank has notice. These words, of Kerr, J. in R. D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. (1978) Q. B. 146, and approving these observations, of Lord Denning M. R. in the later case of Edward Owen Engineering Ltd. v. Barclays Bank International Ltd. and anr. 1978 (1) Q,. B. 159, have since found their eche in subsequent decisions both in England and in this country. Brown, L J. who concurred with master of Rools in the case of Edward Owen Engineering Ltd. (supra), went a step further and held that on the language of the guarantee with which the Court was concerned in that case, such guarantee had much more of the Characteristics of a promissory note than the characteristics of a guarantee. " These observations of Kerr, J. and Lord Denning M. R. were recently quoted with approval by the Supreme Courr in the case of United Commerctal Bank, AIR 1981 S. C. 1426. The Court affirmed that "a letter of credit sometimes resembles and is analogous to a contract of guarantee. t