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TMI Blog1997 (5) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... th August, 1995, as per the schedule of the supply agreed to by the parties. According to one of the clauses of the aforesaid agreement respondent no. l had agreed to furnish bank guarantees in favour of the appellant. Out of the above six, only four bank guarantees were furnished including bank guarantee no. 40/51 dated 1st December, 1994 for a sum of Rs.26,15,000/- and bank guarantee no.40/47 dated 24th November, 1994 for a sum of Rs.35 lacs. These are the bank guarantees with which we are concerned in the present case. Bank guarantee no.40/51 was issued to ensure timely delivery of equipment and supply by respondent no. 1. The relevant clauses of the said bank guarantee no.40/51 are as follows: "In consideration of the premises the Guarantor hereby unconditionally and irrevocably undertake to pay to the Purchaser on their first written demand and without demur such a sum not exceeding Rs.26,15,000/- (Twenty six lacs fifteen thousand only) as the purchasers may demand representing 5% (five per cent) of the contract price, and if the guarantor fails to pay the sum on demand the guarantor shall also pay on the sum demanded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted under clause 13 of the said agreement. The guarantor shall pay to the purchaser on demand the sum under clause 1 above without demur and requiring the purchasers to invoke any legal remedy that may be available to the them, it being understood and agreed firstly that the purchaser shall be the sole judge of and as to whether the sellers have committed any breach(es) of any of the terms and conditions of the said agreement and secondly that the right of the purchasers to recover from the guarantor any amount due to the purchasers shall not be affected or suspended by reasons of the fact that any dispute or disputes have been raised by the seller with regard to their Liability or that proceedings are pending before any Tribunal, arbitrator(s) or court with regard thereto or in connection therewith, and thirdly that the guarantor shall immediately pay the aforesaid guaranteed amount on demand and it shall not be open to the guarantor to know the reasons of or to the investigate or to go into the merits of the demand or to question or to challenge the demand or to know any facts affecting the demand, and lastly that it shall not be open to the guarantor to require the proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance amount which had been paid to respondent no.1 in respect of which this bank guarantee had been issued, remained unadjusted. The bank was accordingly required to pay the said amount of Rs.33 lacs. According to the appellant it is only after 16th January, 1996 that it became aware of the filing of the aforesaid suit and the injunction application and it entered appearance in Court on 18th January, 1996 even though no notice had been served on it. As per the appellant, there was delay in the disposal of the injunction application, consequently it approached the High Court for appropriate directions and the Allahabad High Court vide order dated 10th may, 1996 directed the civil Judge, Meerut Cantt, to dispose of the suit within the time fixed by it . By a detailed order dated 20th August 1996, the Second Civil Judge (Sr. Division) Meerut vacated the ex parte injunctions which had been granted and dismissed the injunction applications. In arriving at this conclusion it observed that respondent no.1 had not stated that the work had been completed and nor was there any allegation of cheating or fraud contained in the plaint which had been filed. The trial court referred to a numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the terms of the agreement and that the appellant had bought equipment from various markets due to which the advance amount which had been paid to respondent no.1 in respect of which this bank guarantee had been issued, remained unadjusted. The bank was accordingly required to pay the said amount of Rs.33 lacs. According to the appellant it is only after 16th January, 1996 that it became aware of the filing of the aforesaid suit and the injunction application and it entered appearance in Court on 18th January, 1996 even though no notice had been served on it. As per the appellant, there was delay in the disposal of the injunction application, consequently it approached the High Court for appropriate directions and the Allahabad High Court vide order dated 10th may, 1996 directed the civil Judge, Meerut Cantt, to dispose of the suit within the time fixed by it . By a detailed order dated 20th August 1996, the Second Civil Judge (Sr. Division) Meerut vacated the ex parte injunctions which had been granted and dismissed the injunction applications. In arriving at this conclusion it observed that respondent no.1 had not stated that the work had been completed and nor was there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended that the High Court fell in serious error in ignoring and not in even referring to the decisions of this Court where the principles regarding the grant of injunction in matters relating to encashment of bank guarantees have been clearly spell out. Had this been done, the learned counsel submits, the High Court could not, in law, have continued with the temporary injunction. Numerous decisions this Court rendered over a span of nearly two decades have laid down and reiterated the principles which the Courts must apply which considering the question whether to grant an injunction which has the effect of restraining the encashment of a bank guarantee. We do not think necessary to burden this judgment by referring to all of them. Some of the more recent pronouncements on this point where the earlier decisions have been considered and reiterated are Svenska Handelsbanken Vs. Toubro Ltd. Vs. Maharashtra State Electricty Board and ors. [(1995) 6 SCC 68], Hindustan Steel Works Construction Ltd. Vs. G.S. Atwal & co. (Engineers) Pvt. Ltd. [(1995) 6SCC 76] and U.P. State Sugar Corporation Vs. Sumac International Ltd. [(1997)1 SCC 568]. The gemeral principle which has been laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that rests on the in corroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must clapse between the granting of such an injunction and an application by the bank to have it charged." (emphasis supplied) The aforesaid passage was approved and followed by this court in U.P. co-operative Federation Ltd. Vs. Singh consultants and Engineers (P) Ltd. [(1988) 1 SCC 174]. The secondly exception to the rule of granting injunction, i.e., the resulting of irretrievable injury, has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if he ultimately succeeds. This will have to be decisively established and it must be proved to the satisfaction of due Court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary. by way of restitution. In the instant case, as has been already noticed there were two types of bank guarantees which were issued. Bank Guarantee No. 40/51 for Rs.26,15,000/- was issued to issues timely y performance of the agreement by respondent No. 1. the relevant terms of this guarantee firstly makes it clear that the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents that the full amount was ginen adjusted and no amount remained outstanting and, therefore, the bank guarantee No.40/47 could no longer be regarded as alive . In support of this contention, the learned counsel relied on the observations of this Court in Larson & Turbo Ltd. Vs. Maharashtrata state Electricity Board and ors. (1995) 6 SCC 68 where an injunction was granted wheree the bank guarantee which was issued was to be kept alive till the successful completion of trial operations. our opinion, this decision can be of no assistance to respondent no. 1 because in Larson & Turbo's case (supra) this Court found that the guarantee which had been given by the bank was to ensure only till the successful completion of the trail operations and the taking over of the plant. The documents revealed that the contractual terms in this regard has been complied with and after successful completion of the trial operation, the plant had admittedly been taken over. In view of this Court that the terms of the bank gurantee did not permit its invocation once the trial operation have been successfully completed. In the present case clause 3 of bank guarantee No. 40/47 relating to adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the bank guarantees were issued, was not sought to be avoided by alleged fraud, nor was it at any point of time alleged that the bank guarantee was issued because any fraud had been played by the appellant. We have no manner of doubt that the bald assertion of fraud had been made solely with a view to obtain an order of injunction . In the absencce of established fraud and not a mere allegation of fraud and that also having been made only in the injunction application , the court could not, in the present case have granted an injunction relating to the encashment of the bank guarantees. It is unfortunate that the High Court did not consider it necessary to refer to various judicial pronouncements of this Court in which the principles which have to be fullowed while examining an application for grant of interim relief have been clearly laid down. The observation of the High Court that reference to judicial decisions will not be of much importance was clear a me1hod adopted by it in avoiding to fo11ow and apply the law as laid down by this Court. Yet another scrious for which was carmnitted by the High Court, in the present case, was not to examine the tenns of the bank guarantee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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