TaxTMI 
TaxTMI 
1996 (7) TMI 586
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....espondent from invoking the bank guarantee No. 33/1991 dated February 13, 1991 to encash Rs. 57,57,970 pursuant to the letter of invocation dated April 5, 1995. The facts mentioned therein are that petitioner had entered into contract oil March 30, 1991 pursuant to a tender submitted by him to construct 108 residential quarters at Katharia, Bhagirath Puram, Tehri. The construction was to be completed within stipulated period but was not completed. In terms of the contract, the first respondent had terminated it. The petitioner availed of the remedy under Section 20 of the Act for appointment of an arbitrator for reference of the dispute in terms of the contract. Pending consideration thereof, he filed an application to restrain the responde....
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....ment. We, UCO Bank, 5, Parliament Street, New Delhi do hereby undertake to pay the amount due and payable under this guarantee without any demur, merely on a demand from the Corporation stating that the amount claimed is due by way of loss of damage caused to or would be caused to or suffered by the Corporation by reason of breach by the said contractor (s) of any of terms or Conditions contained in the said Agreement or by reason of the Contractor (s) failure to perform the said Agreement, Any such demand made on the bunk shall be conclusive as regards the amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 57,57,970 plus interest d....
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....58 w.e.f. 31.10.1994 till the date of payment by you. This notice of demand may be treated as fresh a demand to pay the above noted amounts in terms of order dated 1.9.1994 passed by the Hon. High Court of Delhi at New Delhi in O.M.P. No. 39/1994 titled as M/s, Ansal Engineering Projects Ltd. versus Tehri Hydro Development Corporation Ltd. & Yourself Photo copy of the said order is enclosed herewith for ready reference." It is settled law that bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. Unless fraud or spe....
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....ties. The trading operation would not be jettisoned and faith of the people in the efficacy of banking transactions Would not be eroded or brought to disbelief. The question therefore, is : whether the petitioner had made but any case of irreparable injury by proof of special equity or fraud so as to invoke the jurisdiction of the Court by way of injunction to restrain the first respondent from encashing the bank guarantee. The High Court held that the petitioner has not made out either. We have carefully scanned the reasons given by the High Court as well as the contentions raised by the parties. On the facts, we do not find that any case of fraud has been made out. The contention is that after promise to extend time for constructing the b....
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....ispute was pending before the arbitrator. Whether, and if so, what is the amount due to the appellant was to be adjudicated in the arbitration proceedings. The order of the learned Single Judge proceeds on the basis that the amounts claimed were not and cannot be said to be due and the bank has Violated the understanding between the respondent and the Bank in. giving unconditional guarantee to the appellant. The learned Judge held that the bank had issued a guarantee in a standard form, covering a wider spectrum than agreed to between the respondent and the bank and it cannot be a reason to hold that the appellant is in any way fettered in invoking the unconditional bank guarantee. Similarly, the reasoning of the learned Single Judge that b....
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....n exceptional one justifying interference by restraining the appellant from enforcing the bank guarantee. The order of injunction, therefore, was reserved with certain directions with which we are not concerned in this case. A conjoint reading of the bank guarantee and the letter of invocation demanding payment of amount due and payable by the petitioner would show that the first respondent had specified and quantified in terms of the bank guarantee a total sum with interest due thereon in a sum of Rs. 57,57,970 as on April 5, 1995. A demand in terms of clause (i) of the bank guarantee was made, The bank had irrevocably promised and undertaken to pay to the Corporation without any demur or damage an amount not exceeding Rs. 57,57,970 plu....