Court Limits Role in Bank Guarantee Dispute; Focus on Contractual Resolution for Business Demerger Issues.

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Full Text of the Document

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....Invoking and encashing a bank guarantee - Demerger of business - bank guarantee for fulfillment of the duty amount - The High Court acknowledged the limited jurisdiction under Article 226 of the Constitution of India. It stated that it cannot adjudicate on the terms of the demerger or the inter se liability between the petitioner and respondent no. 2. Furthermore, the court recognized the principle that a bank guarantee constitutes an independent contract between the bank and the party in whose favor it is issued. Consequently, the court determined that issues concerning the invocation of the bank guarantee should be addressed in appropriate proceedings dealing with contractual matters.....