Case Note & Summary
The Plaintiff, ITD Cementation India Ltd., filed a suit seeking a restraint order against Defendant No.1, Reliance Infrastructure Limited, from demanding or receiving amounts under ten bank guarantees. The Plaintiff also sought an interim injunction against the Defendant Banks from making payments under those guarantees. The Plaintiff was appointed as a subcontractor by Defendant No.1 under an agreement dated 12th April 2011 for the construction of the Pune-Satara section of National Highway-4. The agreement provided for mobilization advances to be secured by bank guarantees. Disputes arose between the parties regarding the performance of the contract. The Plaintiff alleged that Defendant No.1 had committed breaches and fraudulently invoked the bank guarantees. The court examined the principles governing injunctions against bank guarantees, noting that such injunctions are granted only in cases of fraud or irretrievable injustice. The court found that the Plaintiff had made out a prima facie case of fraud and special equities, as Defendant No.1 had not disclosed the true state of affairs and its conduct would cause irretrievable injustice. The court granted an interim injunction restraining Defendant No.1 from encashing the bank guarantees and the Banks from making payment until further orders.
Headnote
A) Bank Guarantee - Injunction against encashment - Fraud and Irretrievable Injustice - The court considered whether an injunction can be granted against encashment of bank guarantees where there is a dispute between the parties. The court held that an injunction can be granted only in cases of fraud or irretrievable injustice. The Plaintiff must establish a prima facie case of fraud or special equities. (Paras 1-10) B) Bank Guarantee - Special Equities - Irretrievable Injustice - The court examined the concept of special equities and irretrievable injustice. It held that where the Plaintiff has a strong prima facie case of breach of contract by the Defendant and the Defendant's conduct amounts to fraud, the court can grant injunction to prevent irretrievable injustice. (Paras 11-20) C) Bank Guarantee - Fraud - Prima Facie Case - The court found that the Plaintiff had made out a prima facie case of fraud by the Defendant No.1 in invoking the bank guarantees. The Defendant No.1 had not disclosed the true facts and had acted in a manner that would cause irretrievable injustice to the Plaintiff. (Paras 21-30)
Issue of Consideration
Whether the Plaintiff is entitled to an injunction restraining the Defendant No.1 from encashing the bank guarantees and the Defendant Banks from making payment thereunder.
Final Decision
The court granted an interim injunction restraining Defendant No.1 from in any manner demanding or receiving amounts under the bank guarantees and restraining Defendant Banks from making any payments to Defendant No.1 under the said bank guarantees until further orders.
Law Points
- Bank Guarantee
- Injunction
- Fraud
- Irretrievable Injustice
- Special Equities
