Unconditional bank guarantee enforcement may be restrained only for special equities, fraud, or irretrievable injustice.

An unconditional bank guarantee is ordinarily enforceable independent of disputes under the underlying contract, and restraint is justified only in exceptional cases such as established fraud or irretrievable injustice. On the correspondence and invoices, the Delhi High Court found prima facie special equities in favour of the plaintiff, including that the site was not ready when expected and that the mobilization advance had been substantially used for the defendant's project. The Court held that encashment would cause irretrievable injustice and that interim injunction against invocation and encashment of the guarantee was warranted.

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Issues: Whether the plaintiff was entitled to interim injunction restraining invocation and encashment of the bank guarantee on the ground of special equities and irretrievable injustice.

Analysis: The bank guarantee was unconditional and ordinarily enforceable independent of disputes under the underlying contract. Interference was justified only in exceptional cases, such as established fraud or where allowing encashment would cause irretrievable injustice. On the correspondence and invoices, the plaintiff had prima facie shown that the site was not ready when expected, that the mobilization advance was substantially used for procuring material for the defendant's project, and that the balance of convenience and special equities lay in its favour. The Court held that permitting encashment would cause irretrievable injustice and that the circumstances justified restraint against enforcement of the guarantee.

Conclusion: Interim injunction restraining encashment of the bank guarantee was warranted in favour of the plaintiff.

Ratio Decidendi: An unconditional bank guarantee may be restrained only in exceptional cases where the applicant establishes special equities amounting to irretrievable injustice or a legally cognisable fraud affecting enforcement.

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