The court held that interim injunctions regarding bank guarantees must include conditions to keep the guarantees alive to prevent undermining the interests of the bank providing the guarantee.

JUDGMENT

Rajiv Sahai Endlaw, J.

CM No.11464/2021 (for exemption)

1. Allowed, subject to just exceptions and as per extant rules.

2. The application is disposed of.

FAO (COMM) No.78/2021 & CM No.11463/2021 (for stay)

3. The appeal impugns the order dated 2nd March, 2020 of the Commercial Court, allowing the application of the respondent No. 1/plaintiff under Order XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908 (CPC) and injuncting encashment of bank guarantee.

4. The respondent No. 1/plaintiff had a contract from respondent No. 3 Syrian Corporation for Spinning and Weaving, an entity incorporated in and according to laws of Syria, whereunder the respondent No. 1/plaintiff was required to furnish a bank guarantee. The respondent No. 1/plaintiff requested its banker namely Syndicate Bank, since amalgamated with respondent No. 2 Canara Bank, to issue the said guarantee and the Syndicate/Canara Bank in turn requested the appellant to issue the bank guarantee. The appellant accordingly issued the bank guarantee in favour of the respondent No. 4 Commercial Bank of Syria, being the banker of the respondent No. 3, with which the respondent No. 1/plaintiff had contracted.

5. The respondent No. 1/plaintiff instituted the suit, from interim order wherein this appeal arises, for declaration, that the contract had become null and void and that no monies were payable by the respondent No. 1/plaintiff under the bank guarantees aforesaid. In the said suit, as aforesaid, interim injunction restraining payment under the bank guarantee has been granted, taking into consideration the war raging in Syria.

6. The contention of the counsel for the appellant is that the respondent No. 4 Commercial Bank of Syria, within the period of validity of the guarantee, had notified the appellant to either make payment under the guarantee or to extend the term of the guarantee but the Syndicate/Canara Bank was not willing to extend the corresponding guarantee in favour of the appellant. It is further argued that the monies claimed by the Commercial Bank of Syria under the guarantee furnished by the appellant will be recovered by the Commercial Bank of Syria from the appellant in the International Clearing House and the appellant would be left with no remedy against the respondent No. 1/plaintiff or the Syndicate/Canara Bank.

7. As would be evident from the above, the grievance of the appellant is not on the merits of the dispute, but qua protecting its own interest.

8. The interim order of stay of encashment of bank guarantee cannot be permitted to lead to a situation where though interim injunction against payment is granted to the bank issuing the guarantee but no protection is afforded to such bank. For this reason, ordinarily all such interim orders, whenever granted, are subject to the condition that the plaintiff keeps the bank guarantee alive and which condition is found to be missing from the impugned order.

9. However the appellant, instead of requesting the Commercial Court to impose such condition on the respondent No. 1/plaintiff, has rushed with this appeal. It is not the case of the appellant that the monies have already been recovered from it or that after the notice asking the appellant for extension of guarantee and in the alternative invoking the guarantee, any other notice has been served on it, invoking the guarantee. The remedy of the appellant thus was/is to approach the Commercial Court to impose condition on the respondent No. 1/plaintiff to keep the guarantee alive.

10. At this stage, the counsel for respondent No. 1/plaintiff appears on advance notice and has contended that in fact the bank gu