Bank guarantee encashment can be restrained only for proven fraud or irretrievable injustice; contract disputes go to arbitration.

Injunction against encashment of a confirmed bank guarantee is exceptional and will be granted only on a prima facie case of egregious fraud or special equities amounting to irretrievable injustice. A dispute over whether contractual obligations were performed, or whether liquidated damages were payable, was held to be a matter for arbitration and not a sufficient basis to restrain invocation of the guarantee. Financial hardship alone did not justify interference with an on-demand guarantee. The invocation was treated as consistent with the contractual mechanism for curing breach and claiming liquidated damages, so restraint on encashment was refused and the security remained enforceable pending resolution of the underlying dispute in arbitration.

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Issues: Whether injunction should be granted restraining encashment of the performance bond or bank guarantee on the grounds of alleged breach of the guarantee terms, fraud, or irretrievable injustice.

Analysis: Relief against encashment of a confirmed bank guarantee is exceptional and is available only where there is an established fraud of an egregious nature or where special equities justify protection against irretrievable injustice. The petitioner's dispute that it had fulfilled the contract and that liquidated damages were not payable raised matters for arbitration and did not by itself justify restraint. The record did not show prima facie fraud or irretrievable injustice, and financial hardship was not a sufficient ground to interfere with an on-demand guarantee. The invocation was also held to be in accordance with the contractual mechanism for curing breach and claiming liquidated damages.

Conclusion: Injunction was not warranted and the petition for restraint on encashment failed.

Final Conclusion: The request to prevent invocation of the bank guarantee was rejected, leaving the beneficiary free to enforce the security and the underlying contractual disputes to be decided in arbitration.

Ratio Decidendi: A court will not restrain encashment of a confirmed bank guarantee unless a prima facie established fraud or irretrievable injustice of an exceptional nature is shown; disputes on contractual performance or liability for damages are not, by themselves, sufficient.

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