Case Note & Summary
The plaintiff, Kryshnajay Developers Private Limited, filed a suit seeking a declaration that the invocation of a bank guarantee by the defendants (Kapil M. Mahtani and Vikas M. Mahtani) was illegal and void. The bank guarantee was issued by ICICI Bank in favor of the Mahtanis for Rs. 10 crores to secure the plaintiff's performance under a Development Agreement dated 26 July 2012 and an Agreement for Permanent Alternate Accommodation dated 22 November 2014. The plaintiff alleged that the Mahtanis had committed breaches of the agreements and that the invocation was fraudulent. The court examined the principles governing injunctions against bank guarantees, noting that such injunctions are granted only in cases of established fraud or irretrievable injustice. The court found that the plaintiff had not made out a prima facie case of fraud or special equities. The balance of convenience was against granting an injunction as the bank guarantee was an unconditional obligation. The court dismissed the notice of motion seeking interim relief, holding that the plaintiff had an alternative remedy of damages and that the invocation could not be restrained.
Headnote
A) Bank Guarantee - Invocation - Injunction - Fraud - Irretrievable Injustice - The court considered whether an unconditional bank guarantee can be restrained from invocation. Held that an injunction against invocation of a bank guarantee can be granted only in cases of established fraud or irretrievable injustice, which must be pleaded and proved with clear evidence. The plaintiff failed to establish any fraud or special equities. (Paras 1-42) B) Contract - Development Agreement - Breach - Prima Facie Case - The plaintiff developer sought to restrain invocation of a bank guarantee issued to secure performance under a Development Agreement. The court found that the plaintiff had not made out a prima facie case as there were serious disputes regarding breach of obligations, and the balance of convenience did not favor the plaintiff. (Paras 1-42) C) Specific Performance - Alternative Remedy - Damages - The court noted that the plaintiff had an alternative remedy of damages and that the bank guarantee was a security for performance. The plaintiff's claim for specific performance did not entitle it to an injunction against invocation of the guarantee. (Paras 1-42)
Issue of Consideration
Whether the plaintiff developer is entitled to an interim injunction restraining the invocation of an unconditional bank guarantee on grounds of alleged fraud and irretrievable injustice.
Final Decision
The Notice of Motion is dismissed. The plaintiff is not entitled to any interim relief restraining the invocation of the bank guarantee.
Law Points
- Bank Guarantee
- Invocation
- Fraud
- Irreparable Injury
- Prima Facie Case
- Balance of Convenience
- Specific Performance
- Development Agreement
