Court grants relief in bank guarantee dispute, restraining encashment of 2 guarantees and upholding 6 others.

The court partially granted the petition by restraining the encashment of two conditional bank guarantees and directed the return of the equivalent amount to the bank. The court upheld the invocation of six unconditional bank guarantees and directed the release of the corresponding amount to the respondent. The court disposed of the petition and the pending application for amendment of the petition.

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Issues Involved:
1. Invocation and encashment of bank guarantees.
2. Alleged fraud and breach of contract by the respondent.
3. Conditional vs. unconditional nature of bank guarantees.
4. Special equities and irretrievable injustice.
5. Compliance with contractual terms and conditions.

Detailed Analysis:

1. Invocation and Encashment of Bank Guarantees:
The petitioner sought to restrain the respondent from invoking and encashing the bank guarantees under Section 9 of the Arbitration and Conciliation Act, 1996. The respondent argued that the bank guarantees had already been invoked and encashed, making the petition infructuous. The court noted that the respondent had issued letters to the bank invoking the unconditional bank guarantees and had received demand drafts for the total amount, which were deposited in its account. The court held that the invocation was in accordance with the terms of the bank guarantees for six of the eight guarantees, making the petition partially infructuous.

2. Alleged Fraud and Breach of Contract by the Respondent:
The petitioner alleged that the invocation of the bank guarantees was fraudulent and against the terms of the contract. The court examined the allegations of fraud and found that the petitioner had not provided specific pleadings or material particulars to establish fraud. The court held that the allegations of fraud were related to the merits of the case and could be raised in arbitration proceedings but did not warrant interference with the invocation of the bank guarantees.

3. Conditional vs. Unconditional Nature of Bank Guarantees:
The court analyzed the terms of the bank guarantees to determine whether they were conditional or unconditional. For six of the bank guarantees, the court found that the terms were unconditional, as they required payment upon receipt of a written demand without the need for further proof or grounds. However, for two bank guarantees, the court found that the terms were conditional, requiring the contractor's failure to fulfill obligations and refusal to repay the advance payment. The court held that the invocation of these two guarantees was contrary to their terms and required compliance with the stipulated conditions.

4. Special Equities and Irretrievable Injustice:
The petitioner argued that special equities and irretrievable injustice warranted interim relief against the invocation of the bank guarantees. The court held that special equities must be of a gross nature, leaving the party remediless. The court found that the petitioner had not established special equities or irretrievable injustice, as the petitioner could seek remedies in arbitration proceedings. The court noted that disputed questions regarding breaches of the contract did not constitute special equities.

5. Compliance with Contractual Terms and Conditions:
The court examined whether the invocation of the bank guarantees complied with the contractual terms and conditions. For six bank guarantees, the court found that the invocation was in accordance with the terms. However, for two bank guarantees, the court found that the invocation did not comply with the conditions stipulated in the guarantee documents. The court directed that the amount equivalent to these two guarantees be returned to the bank, and the petitioner was required to keep the guarantees alive by renewing them if necessary.

Conclusion:
The court partially granted the petition by restraining the encashment of two conditional bank guarantees and directed the return of the equivalent amount to the bank. The court upheld the invocation of six unconditional bank guarantees and directed the release of the corresponding amount to the respondent. The court disposed of the petition and the pending application for amendment of the petition.

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