Bank guarantees upheld in arbitration appeal; injunction order set aside.

The Supreme Court held that the bank guarantees were properly invoked by the appellant, as they were unconditional and payable on demand. The court ruled that the arbitration proceedings did not preclude the appellant from invoking the guarantees. The High Court's injunction order was deemed unjustified, and the Supreme Court set it aside, vacated the injunction, and directed the respondent to pay the costs of the appeals.

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Issues Involved:
The issues involved in the judgment are the invocation of bank guarantees, arbitration clause, jurisdiction of the court to entertain appeals from injunction orders, and the validity of the injunction order.

Bank Guarantees Invocation:
The appellant entered into a contract with the respondent, which included bank guarantees payable on demand. Disputes arose regarding payments under the contract, leading to the appellant invoking the bank guarantees. The bank guarantees were unconditionally payable on demand, and the court held that the guarantees were properly invoked.

Arbitration Clause:
Arbitration proceedings were initiated by both parties, and the bank guarantees were kept alive during this process. The appellant refrained from realizing the bank guarantees while arbitration was ongoing. However, the court ruled that the arbitration proceedings did not preclude the appellant from invoking the bank guarantees, as they were unconditional and payable on demand.

Jurisdiction of the Court:
A petition was filed seeking an injunction to prevent the appellant from invoking the bank guarantees. The Single Judge of the Delhi High Court granted the injunction, which was upheld on appeal. The Supreme Court held that the High Court's order of injunction was not justified, as the bank guarantees were properly invoked and there was no irretrievable injustice to the respondent.

Validity of Injunction Order:
The court referred to previous judgments emphasizing that banks must honor guarantees unless there is fraud or irretrievable injustice. The court found no merit in the arguments presented to justify the injunction order. Consequently, the Supreme Court allowed the appeals, set aside the High Court's order, vacated the injunction, and directed the respondent to pay the costs of the appeals.

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