The court emphasized the unconditional nature of the bank guarantee and the need to establish fraud or irretrievable injury to warrant an injunction, applying principles from various Supreme Court judgments.

MUKUNDAKAM SHARMA, J.

( 1 ) THE present appeal is directed against the judgment and order dated 3rd november, 2004 passed by the learned Single Judge in OMP No. 273/2004, rejecting the petition filed under Section 9 of the Arbitration and Conciliation Act seeking an interim injunction pending arbitration against encashment / remittance of the performance bank guarantee at 10% of the contract value furnished to the respondent or any one acting on its behalf.

( 2 ) AN agreement was entered into between the appellant and the respondent on 10th may, 2000, whereunder the respondent agreed to buy UPS Systems from the appellant for a consideration value of Rs. 1,68,12,400/ -. Payment term in clause 15 (a) to (d) thereof provided for phased payments linked with supply of equipment with performance bank guarantee of 10% to be provided at 15 (b) stage. At the stage when the appellant demanded payment of the balance amount, the respondent agreed to pay the same provided appellant furnished performance bank guarantee so agreed to by the appellant and in terms of the aforesaid agreement the appellant furnished a conditional bank guarantee for Rs. 16,81,238. 50p. The aforesaid conditional bank guarantee furnished on 10th August, 2001 was amended on 20th August, 2001. At this stage, we may point out the principal amendment, which was brought in by the amendment dated 20th August, 2001. The following paragraph appearing in the bank guarantee dated 10th August, 2001 reads as follows:"therefore, we, the Bank, hereby affirm that we are Guarantors and responsible on behalf of the Supplier upto a total of Rs. 16,81,238. 50 (Rupees Sixteen lacs eighty one thousand Two hundred Thirty Eight and paise fifty only) and we undertake to pay any sum or sums within the limit of Rs. 16,81,238. 50 (Rupees sixteen lacs Eighty one thousand Two hundred Thirty Eight and paise fifty only)as aforesaid upon receipt of written demand from the purchaser and Company within the validity of this Bank Guarantee establishing the Supplier to be in default for the performance of their warranty obligations under the Contract. "

( 3 ) THE aforesaid stipulation in paragraph 4 of the bank guarantee dated 10th august, 2001 came to be substituted under the amendment dated 20th August, 2001 and paragraph 4 of the bank guarantee, which was amended, reads as under:"therefore, we, the Bank, hereby affirm that we are Guarantors and responsible on behalf of the Supplier upto a total of Rs. 16,81,238. 50 (Rupees Sixteen lacs eighty one thousand Two hundred Thirty Eight and paise fifty only) and we undertake to pay any sum or sums within the limit of Rs. 16,81,238. 50 (Rupees sixteen lacs Eighty one thousand Two hundred Thirty Eight and paise fifty only)as aforesaid upon receipt of written demand from the Company within the validity of this Bank Guarantee. "

( 4 ) A comparative reading of the aforesaid two clauses would make it clear that the earlier stipulation of the liability of the company to establish that the supplier is in default for the performance of their warranty obligations under the contract now stands deleted in the amended bank guarantee, which was furnished by the appellant herein.

( 5 ) THE case of the appellant before the learned Single Judge was that the appellant had supplied all equipment to the respondent by 2nd of August, 2000 and that the respondent had defaulted in making the stipulated payment consequent upon which, a balance sum of Rs. 49,99,338/- remained unpaid. The respondent upon a demand made by the appellant only agreed to pay the same provided the performance bank guarantee of 10% of contract value was furnished. Finally, the bank guarantee as sought for was furnished, which was amended on 20th August, 2001. It is the case of the appellant that even after furnishing the aforesaid bank guarantee in the terms as pointed out herein before, the respondent made a payment of only Rs. 30 lacs on 22nd August, 2001 and a false allegation of payment of Rs. 11,9