Territorial jurisdiction over bank guarantee disputes turns on the contract and an exclusive foreign forum clause, not collateral arrangements.

Territorial jurisdiction to restrain invocation of a performance bank guarantee depends on where the relevant cause of action arises under the underlying commercial arrangement and the guarantee documents. A bank guarantee operates as an independent contract, so a collateral arrangement or mere issuance of a counter-guarantee at Delhi did not create jurisdiction where the documents conferred exclusive foreign forum jurisdiction. The Court also noted that an exclusive jurisdiction clause can be effective even without the word "only" if contractual intention is clear, and allegations of fraud, hardship, or limited time did not override that bar. The plaint was therefore to be returned for presentation before the competent court.

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Issues: Whether the Delhi High Court had territorial jurisdiction to entertain a suit seeking declaration and injunction against invocation of a performance bank guarantee and the counter guarantee, and whether the plaint was liable to be returned for presentation before the court of competent jurisdiction.

Analysis: The dispute centred on whether any part of the cause of action arose in Delhi so as to confer jurisdiction. The Court held that a bank guarantee is an independent contract and that the jurisdictional question must be tested with reference to the cause of action arising under the underlying commercial arrangement and the guarantee itself. Mere issuance of the counter guarantee at Delhi, or the existence of any collateral arrangement, was insufficient to create jurisdiction where the guarantee documents themselves vested jurisdiction in a foreign forum. The Court further held that an exclusive foreign jurisdiction clause, even without the word "only", can validly exclude other forums when the contractual intention is clear. The plea of fraud and the reliance on hardship or paucity of time did not displace the jurisdictional bar.

Conclusion: The Court found that it lacked territorial jurisdiction to entertain the suit and directed return of the plaint for filing before the competent court.

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