Case Note & Summary
The appellant, VKE Plumbing Private Limited, was awarded a contract by respondent No.1, Blue Ridge Hotels Private Limited, for plumbing and fire fighting works. The appellant executed two bank guarantees: one for mobilization and one for performance. Disputes arose, and on 26 May 2015, respondent No.1 terminated the contract and sought to invoke the bank guarantees. The appellant filed a suit seeking an injunction against the invocation, which was granted by the trial court. The respondent appealed. The High Court held that a bank guarantee is an independent contract and can only be restrained in cases of fraud or irretrievable injustice. The appellant did not allege fraud or demonstrate irretrievable injustice. The court allowed the appeal, setting aside the injunction and permitting the respondent to invoke the bank guarantees.
Headnote
A) Contract Law - Bank Guarantee - Invocation of Bank Guarantee - Injunction - The court considered whether an injunction can be granted against invocation of an unconditional bank guarantee in the absence of fraud or irretrievable injustice. Held that a bank guarantee is an independent contract between the bank and the beneficiary, and the court should not interfere with its invocation except in cases of fraud or irretrievable injustice. The appellant failed to establish any such ground, and the appeal was allowed, setting aside the injunction granted by the trial court. (Paras 1-12)
Issue of Consideration
Whether the appellant is entitled to an injunction restraining the respondent from invoking the bank guarantees in the absence of any allegation of fraud or irretrievable injustice
Final Decision
Appeal allowed. Impugned order set aside. Respondent No.1 is permitted to invoke the bank guarantees. No order as to costs.
Law Points
- Bank guarantee is an independent contract
- injunction against invocation only in case of fraud or irretrievable injustice
- no prima facie case for injunction when bank guarantee is unconditional and no fraud alleged
