Bank guarantee enforcement upheld: arbitration and counter-guarantee disputes do not defeat demand absent fraud or irretrievable injustice.

An unconditional bank guarantee is ordinarily enforceable on demand because it is independent of the underlying contract. Judicial restraint applies except in established fraud or irretrievable injustice supported by special equities, and pending arbitration does not dilute enforcement. An injunction affecting the counter-guarantee does not provide a defence to the beneficiary's claim, and the Foreign Exchange Manual did not bar payment to the resident beneficiary merely because reimbursement from the overseas bank was disputed. Unconditional leave to defend was therefore not justified, and the defence based on the guarantee dispute was untenable.

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Issues: Whether unconditional leave to defend a summary suit on a bank guarantee could be granted in the absence of a plea or finding of fraud, despite pending arbitration and a foreign court order affecting the counter-guarantee.

Analysis: An unconditional bank guarantee is independent of the underlying contract and must ordinarily be honoured on demand. Judicial interference is confined to exceptional cases involving established fraud or irretrievable injustice supported by special equities. The existence of arbitration proceedings does not dilute the enforceability of the guarantee, and an injunction operating against the counter-guarantee does not constitute a defence to the beneficiary's claim. The Foreign Exchange Manual also indicated that payment to the resident beneficiary was not barred merely because reimbursement from the overseas bank was in issue.

Conclusion: Unconditional leave to defend was not justified, and the defence raised by the bank was untenable.

Final Conclusion: The beneficiary was entitled to proceed on the basis of the bank guarantee, and the order granting unconditional leave to defend was set aside.

Ratio Decidendi: An unconditional bank guarantee cannot be interdicted except on proof of established fraud or irretrievable injustice, and disputes concerning the underlying contract or counter-guarantee do not by themselves furnish a valid defence to enforcement.

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