Unconditional bank guarantees cannot be restrained by interim injunction absent fraud or irretrievable injury, the Supreme Court said.

Unconditional and irrevocable bank guarantees payable on demand without demur cannot ordinarily be restrained by interim injunction during arbitration. The creditor remained entitled to invoke the guarantees because disputes over the amount due were still pending before the arbitrator, and any understanding between the respondent and the bank could not cut down that contractual right. The settled exception for injunctions against bank guarantees applies only on proof of established fraud or irretrievable injury, and neither was shown. The injunction was therefore unwarranted and was set aside in favour of the appellant.

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Issues: Whether an interim injunction could be granted to restrain invocation of unconditional bank guarantees pending arbitration.

Analysis: The guarantees were found to be unconditional and irrevocable, requiring payment on demand without demur and making the creditor the sole judge of breach and loss. The dispute as to the amount due was itself pending before the arbitrator, and the existence of an understanding between the respondent and the bank could not curtail the appellant's right to invoke the guarantees. The settled rule governing injunctions against enforcement of bank guarantees was applied, namely that interference is warranted only in cases of established fraud or irretrievable injury, neither of which was shown.

Conclusion: The injunction against enforcement of the bank guarantees was not justified and was set aside in favour of the appellant.

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