Bank guarantee enforcement remains independent and can be restrained only for clear fraud or special equity, despite winding up.

Bank guarantees are independent undertakings and courts will restrain invocation or encashment only on a clear prima facie case of fraud or comparable special equity. A bare allegation of fraud is insufficient unless supported by specific pleadings and material facts. On the facts discussed, no such case was shown, so the injunction against enforcement was unjustified. Winding up of the contractor and appointment of a provisional liquidator did not suspend or defeat the separate liability under the guarantees, particularly where the guarantee terms preserved enforceability despite liquidation or insolvency. The guarantees remained enforceable as independent contracts.

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Issues: (i) whether an injunction could be granted restraining invocation and encashment of bank guarantees in the absence of pleaded and established fraud or other special equity; (ii) whether the winding up of the contractor and appointment of a Provisional Liquidator affected the enforceability of the bank guarantees or justified staying the proceedings.

Issue (i): whether an injunction could be granted restraining invocation and encashment of bank guarantees in the absence of pleaded and established fraud or other special equity

Analysis: Bank guarantees are independent undertakings and interference with their enforcement is permissible only in exceptional circumstances. A mere allegation of fraud is insufficient unless the pleadings and materials disclose specific facts showing fraud of the kind that vitiates the guarantee transaction. On the facts found, the contractor had failed to complete the work within time, the appellant had made substantial advance payments, and the guarantees had been obtained to secure those advances. The record did not disclose a prima facie case of fraud or any special equity warranting restraint against the bank.

Conclusion: The injunction restraining invocation and encashment of the bank guarantees was unjustified and was liable to be set aside.

Issue (ii): whether the winding up of the contractor and appointment of a Provisional Liquidator affected the enforceability of the bank guarantees or justified staying the proceedings

Analysis: The liability under a bank guarantee is distinct from the claims in the winding up proceedings. The winding up process does not, by itself, extinguish or suspend the bank's independent obligation under a valid guarantee, especially where the guarantee expressly states that it remains operative notwithstanding liquidation, winding up, dissolution, or insolvency of the contractor. The provisions governing stay of proceedings in company matters did not displace the appellant's independent right to enforce the guarantees.

Conclusion: The winding up of the contractor did not prevent enforcement of the bank guarantees or support a stay of the appellant's proceedings.

Final Conclusion: The appeals succeeded, the trial court's injunction was set aside, and the bank was directed to honour the guarantees.

Ratio Decidendi: An injunction against invocation of a bank guarantee can be granted only on a clear prima facie case of fraud or comparable special equity, and the guarantee remains enforceable as an independent contract notwithstanding the debtor's winding up where its terms so provide.

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