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Judgment
Prabir Kumar Majumdar, J.—This appeal arises out of an order passed by the learned Trial Judge on October 13, 1993 refusing to restrain enforcement of bank guarantee. The appellant has assailed the said order of the learned Trial Judge by contending that the learned Trial Judge ought to have passed an order of injunction restraining the respondents from in any way invoking and encashing in any manner the bank guarantees nos. 24/90279/91, 24/90321/91, 24/90280/91 dated February 6, 1991, March 27, 1991 and February 6, 1991 respectively. In this appeal, the Learned Counsel for the appellant has taken mainly the ground that the letter of invocation dated Oct. 4, 1993 by the respondent no. 1 was made after expiry of the period of the bank guarantees and as such this letter of invocation was not operative and was barred by limitation or had become a stale invocation.
It appears to us that the said letter dated October 4, 1993 is not the letter of invocation by the beneficiary, being the respondant no. 2. The letter was addressed by the bank, being the respondent no. 1, to the appellant intimating that the Bank had been called upon by the beneficiary of the concerned bank guarantee to make payment of the amount covered by the said bank guarantee to the beneficiary. By this letter the appellant was also advised to make payment due under the said bank guarantee, on failure of which the Bank would be left with no other option but to take appropriate stops for recovery of the amount from the appellant.
The letter dated October 4, 1993 cannot be a letter of invocation. Here, the beneficiary is the respondent no. 2, the Board of Trustees for the Port of Calcutta. As stated above, there were several bank guarantees which the respondent no. 2 sought to invoke. There were several letters of invocation on similar terms. One such letter of invocation is the letter dated September 20, 1991 (at page 109 of the Paper Book). It is stated in the said letter of invocation that the party had failed to execute the work and so the beneficiary had decided to encash the bank guarantee which was expiring on June 9, 1993. The Bank, being the respondent no. 1, was accordingly requested to send a bank draft drawn in favour of ''Calcutta Port Trust'' for an amount covered by the concerned bank guarantee. This is the letter of invocation and this letter has been issued well within the period of operation of the bank guarantee. The particulars of the bank guarantee are as follows : -
Bank Guarantee No
Date
Valid till
Type of Guarantee
Amount
24/90279
6/2/1991
9/3/1992
1st Mobilisation Advance
52,30,000/-
24/90321/91
17/3/1991
9/3/1992
2nd Mobilisation Advance
26,15,000/-
24/90280/91
6/2/1991
9/6/1993
Performance Guarantee
52,30,000/-
It will appear, therefore, that all the letters of invocation were made within the validity period of the concerned bank guarantees. Therefore, we are unable to accept the contention of the appellant that the letters of invocation were issued much after the expiry of the validity period of the bank guarantees.
It appears to us that all the bank guarantees are unconditional in terms and contain similar terms and conditions. One of the terms and conditions of the bank guarantees is as set out below :-
WE, PUNJAB & SIND BANK, IBD, 6, Scindia House, New Delhi, having its Head Office at Punjab & Sind Bank, Rajendra Place (hereinafter referred to as the ''Bank'' which expression shall, unless repugnant to the context of meaning thereof, include its successors, administrators, executors and assigns) do hereby guarantee and undertake to pay the Owner on demand any and all monies payable by the Contractor to the extent of 30 months as aforesaid at any time upto 9th June, 1993 without any demur, reservation, contest, recourse or protest and/or without any reference to the Contractor. Any Such demand made by Owner on the Bank shall be conclusive and binding notwithstanding any difference between Owner and Contractor or any dispute pending before any Court, Tribunal, Arbitrator or any other Authority. The Bank undertake not to revoke this guarantee during its currency without previous consent of Owner and further agrees that the guarantee herein contained shall continue to be an enforceable till the Owner discharges this guarantee.
It will appear from the above that the bank guarantees are unconditional in terms and upon invocation of the bank guarantees the Bank is bound to honour the bank guarantees without any demur, reservation, contest, recourse or protest and without any reference to the ''contractor'', viz., the appeallant. It is also provided that any such demand made by the ''owner'' (i.e. the beneficiary) on the Bank shall be conclusive and binding notwithstanding any difference between the ''owner'' and ''contractor'' or any dispute pending before any Court, Tribunal, Arbitrator or any other Authority. Therefore, there is no doubt that this bank guarantee is entirely an uncondititonal bank guarantee. It is now settled proposition of law that when there is an unconditional bank guarantee and when according to the terms of the bank guarantee the demand may be made without any demur or protest or any dispute between the parties to the underlying contract, the Bank is bound to honour the bank guarantee upon invocation of the same upon its terms. It is also settled law that the enforcement of bank guarantee can only be stoped on the ground of fraud or special equdity or that some irretrievable injustice would be suffered by the party seeking an order of injunction restraining the beneficiary from invoking the bank guarantee.
There are several decisions of the Supreme Court on the point, the latest one being reported in Svenska Handelsbanken Vs. M/s. Indian Charge Chrome and others, There it has been, inter alia, observed by the Supreme Court that in law relating to bank guarantees, a party seeking injunction from encashing of bank guarantee by the suppliers has to show prima facie case of established fraud and an irretrievable injury. Irretrievable injury should be of the nature that the party seeking restraint order would suffer irreparable harm if the requested relief is not granted and if the restraint order is sought on the ground of fraud, that should be an established fraud and there is a strong prima facie case of such fraud.
In the instant appeal, the only emphasis is laid on the point that the letter of invocation was issued long after the expiry of the validity period of the bank guarantee. It is true that one such ground as to fraud has been taken in the Memorandum of Appeal. But just a passing reference has been made to such ground in the argument. Moreover, we do not see any prima facie case of fraud which one can say is an established fraud.
We do not see any merits in this appeal. The law as to the enforcement of the bank guarantee is well settled by series of decisions of the Supreme Court and in the instant appeal, we do not see any ground to interfere with the operation of the bank guarantees as referred to above.
We affirm the order passed by the learned Trial Judge refusing to restrain enforcement of the bank guarantees. This appeal is, therefore, dismissed. All interim orders passed in the appeal are vacated.
There will be no order as to costs.
Learned Counsel for the appellant prays for stay of operation of this Judgement and Order. This prayer for stay is refused.
All parties shall act on a signed copy of the minutes of the operative part of this Judgment upon usual undertaking.
Rajendra N. Roy, J.
I agree.