Writ relief against bank guarantee enforcement is ordinarily unavailable in commercial contracts absent fraud or special equities.

A writ under Article 226 ordinarily does not lie to restrain enforcement of an unconditional bank guarantee arising from a commercial contract, absent fraud, special equities, or a clear public law element. The existence of an arbitration clause and civil remedies further weighs against writ relief, so the challenge to invocation on that basis failed. The statutory scheme under the Shipping Development Fund Committee (Abolition) Act, 1986 did not prevent invocation on the facts, and the guarantees had been furnished in favour of the Central Government. The respondents were therefore not shown to lack authority to proceed against the guarantees.

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Issues: (i) whether a writ petition under Article 226 of the Constitution of India lies to restrain invocation of bank guarantees arising out of a commercial contract, and (ii) whether the respondents lacked authority to invoke the guarantees under the Shipping Development Fund Committee (Abolition) Act, 1986.

Issue (i): whether a writ petition under Article 226 of the Constitution of India lies to restrain invocation of bank guarantees arising out of a commercial contract.

Analysis: The dispute arose from a tripartite commercial arrangement under which the petitioners furnished bank guarantees for stage payments received towards construction of a vessel. The Court held that enforcement of such guarantees was a contractual matter and did not, by itself, raise a public law issue. In the absence of fraud or other special equities, courts normally do not injunct enforcement of an unconditional bank guarantee. The existence of an arbitration clause and the availability of civil remedies further weakened the request for writ relief.

Conclusion: The writ petition was not maintainable to prevent enforcement of the bank guarantees, and the challenge on this ground failed.

Issue (ii): whether the respondents lacked authority to invoke the guarantees under the Shipping Development Fund Committee (Abolition) Act, 1986.

Analysis: The Court examined the statutory scheme of the 1986 Act, the abolition of the Committee, vesting of rights in the Central Government, and the notifications and correspondence showing delegation and agency. It held that, on the facts, the guarantees had been furnished in favour of the Central Government and the statutory provisions relied upon did not prevent invocation. Even apart from the Act, the Central Government could act through an agent, and the respondent had been treated as such in the course of dealings between the parties.

Conclusion: The respondents were not shown to lack authority to invoke the guarantees.

Final Conclusion: The Court declined to interfere under its writ jurisdiction in a matter governed by contract and upheld the respondents' right to proceed against the bank guarantees.

Ratio Decidendi: A writ under Article 226 ordinarily does not lie to restrain enforcement of a bank guarantee arising from a purely contractual transaction, unless a clear public law element, fraud, or special equities is shown.

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