High Court of Delhi

Zillion Infra Projects (P) Ltd. v. Fab-Tech Works & Constructions Pvt. Ltd. and Ors.

MANU/DE/3350/2015

02.11.2015

Arbitration

Invocation of bank guarantee restricted only for fraud and irretrievable injustice

The Delhi High Court allowed an appeal against an order restraining the encashment of a bank guarantee by the Appellant. It noted that as per precedent laid down, a Court could prevent exercise of a guarantee given only in case of fraud or of irretrievable injustice being perpetrated on the giver of such guarantee. The Respondent’s claim of being prejudiced because it was likely to succeed at arbitration against the Appellant failed to satisfy either of the two criteria. By preventing encashment of the guarantee by the Appellant, the Single judge in the previous decision had defeated the purpose behind the bank guarantee.

Relevant

U.P. State Sugar Corpn. v. Sumac International Ltd. MANU/SC/0380/1997
I.T.C. Ltd. v. Debts Recovery Appellate Tribunal MANU/SC/0968/1998
Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co. MANU/SC/3256/2007

Tags : Bank guarantee prejudice future success

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