Unconditional bank guarantees are enforceable on demand, with injunctions confined to egregious fraud or irretrievable injustice.

Unconditional bank guarantees payable on demand operate as autonomous obligations, and the bank is not concerned with disputes between the beneficiary and the contractor. Courts should interfere only in exceptional cases of egregious fraud or irretrievable injustice; the mere pendency of arbitration, renewal of the guarantees, or earlier non-invocation during arbitration does not bar enforcement. On the facts stated, no material was shown to establish fraud or irretrievable harm, so restraint on encashment was not justified and invocation of the guarantees was permitted.

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

Analysis: Bank guarantees payable on demand are autonomous obligations and the bank is not concerned with disputes between the beneficiary and the contractor. Interference is justified only in exceptional cases of fraud of an egregious nature or where encashment would cause irretrievable injustice. The mere pendency of arbitration, renewal of the guarantees, or prior non-invocation during arbitration does not bar invocation of unconditional guarantees. No material was shown to establish fraud or irretrievable harm.

Conclusion: The injunction restraining realisation of the bank guarantees was not justified and the appellant was entitled to invoke them.

Ratio Decidendi: Courts should not restrain encashment of an unconditional bank guarantee payable on demand except in cases of established egregious fraud or irretrievable injustice.

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