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IN THE HIGH COURT OF JUDICATURE AT MADRAS
SENTHILKUMAR RAMAMOORTHY
Geo Foundations Structures Private Limited represented by its Director and Authorized Officer Mr.K.N.Madhusudan Pillai – Appellant
Versus
Bharatiya Nabhikiya Vidyut Nigam Limited – Respondent
| Table of Content |
|---|
| 1. contract for site assembly art fbr 1 and 2 includes bank guarantees. (Para 1 , 2) |
| 2. respondent counters with claims of non-arbitrability and justification for invocation. (Para 4) |
| 3. arbitration clause requires disputes to be specifically referred to arbitration. (Para 5 , 6) |
| 4. interim injunction granted pending arbitration with conditions for bank guarantees. (Para 14 , 15) |
| 5. application disposed without order as to costs. (Para 16) |
ORDER :
SENTHILKUMAR RAMAMOORTHY, J.
The applicant entered into a contract with the respondent for the design and construction of a site assembly shop for FBR 1 and 2 at the BHAVINI plant site at Kalpakkam. The contract contains a provision for resolution of disputes by arbitration. The contract also provides for performance guarantee in the form of a bank guarantee and for retention of 6% of each running account bill as retention money. The applicant procured and submitted two bank guarantees for sum of Rs.2,23,66,425/- and Rs.2,00,00,000/-, respectively. The agreed position is that these two bank guarantees were extended from time to time and the term runs upto
31.03.2026 and 30.06.2026, respectively.
2. By communication dated 02.02.2026
The invocation of bank guarantees must establish loss due to breach; disputes must be arbitrated as per contract.
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.
A confirmed Bank Guarantee/irrevocable Letter of Credit cannot be interfered with unless there is established fraud or irretrievable injustice involved in case.
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....
Bank guarantees cannot be interdicted on account of contractual disputes between the parties, and exceptions for interdicting bank guarantees include cases of egregious fraud and irretrievable injust....
Bank guarantees can be invoked regardless of disputes, unless fraud or irretrievable harm is clearly established.
The invocation of bank guarantees must adhere strictly to the contractual terms; courts may intervene to prevent encashment if it risks undermining arbitration.
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