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of <h1>Supreme Court restores trial court's order in bank guarantee validity case.</h1> The Supreme Court set aside the High Court's decision and restored the trial court's order in a case involving the validity of bank guarantees. The ... - Issues Involved:1. Validity of the bank guarantees.2. Allegations of fraud against lenders and suppliers.3. Jurisdiction of Indian courts.4. Conditions for granting an injunction against the enforcement of bank guarantees.Summary:Validity of the Bank Guarantees:The plaintiff sought a declaration that the guarantees executed by Industrial Development Bank of India (IDBI) in favor of the lenders are void and an injunction restraining the guarantor from making payments under the guarantees. The credit agreements specified that any amounts payable by the borrower shall be paid without set-off or counter-claim, making the borrower's liability unconditional and independent of the performance of the contracts with the suppliers.Allegations of Fraud Against Lenders and Suppliers:The plaintiff alleged that defendants 1 to 3 fraudulently misrepresented the capacity of the power plant, leading the plaintiff to enter into contracts. The trial court found no direct allegation of fraud against defendants 4 to 11 and held that the allegations were based on suspicion. The High Court, however, observed that the facts suggested collaboration between defendant 4 and the suppliers, indicating a prima facie case of fraud.Jurisdiction of Indian Courts:Defendant 4 challenged the jurisdiction of the trial court, citing the arbitration clause in the credit agreements which provided for disputes to be settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Stockholm. Defendant 12 also argued that the Indian courts' jurisdiction was expressly ousted by the terms of the guarantee.Conditions for Granting an Injunction:The trial court vacated the ad interim injunction, concluding that the plaintiff failed to establish a prima facie case of fraud and that the balance of convenience was against the plaintiff. The High Court, however, granted an injunction, restraining defendant 12 from making payments to defendant 4 for two years or until the disposal of the suit, whichever is earlier, based on the alleged fraud and balance of convenience favoring the plaintiff.Supreme Court's Decision:The Supreme Court set aside the High Court's judgment, restoring the trial court's order. It held that the High Court misdirected itself by not adhering to the principles governing injunctions related to bank guarantees. The Supreme Court emphasized that an injunction against a bank guarantee can only be granted in cases of established fraud or irretrievable injustice, neither of which was proven in this case. The appeal was accepted, and the application for interim injunction was dismissed with costs.
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