DWARIKESH SUGAR INDUSTRIES LTD. versus PREM HEAVY ENGINEERING WORKS (P) LTD.

DWARIKESH SUGAR INDUSTRIES LTD. versus PREM HEAVY ENGINEERING WORKS (P) LTD.

Injunctions restraining encashment of bank guarantees should only be granted in clear cases of established fraud or irretrievable harm; mere allegation in pleadings without particulars is insufficient. The High Court erred by granting injunction without reference to settled Supreme Court law and by invoking unjust enrichment, which does not apply to guarantee encashment.

Parties
Appellant: Dwarikesh Sugar Industries Ltd.; Respondent: Prem Heavy Engineering Works (P) Ltd.; Respondent: State Bank of India, Meerut Cantt. Branch
Jurisdiction
India
Judgment Date
07 May 1997
Procedural Posture
Civil Appeal / Appeal From Allahabad High Court Judgment Dated 10.9.96 in C.r. No. 257 of 1996
Outcome
Appeal allowed; judgment and order of Allahabad High Court set aside; order of trial court dismissing injunction application restored.
Legal Topics
Bank Guarantees, Injunctions, Encashment of Guarantees
Commercial Law Contract Law Civil Procedure Bank Guarantees Injunctions Encashment of Guarantees

Case Brief

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Parties

Dwarikesh Sugar Industries Ltd.

Appellant

Prem Heavy Engineering Works (P) Ltd.

Respondent

State Bank of India, Meerut Cantt. Branch

Respondent

Procedural Posture

Civil Appeal / Appeal From Allahabad High Court Judgment Dated 10.9.96 in C.r. No. 257 of 1996

Legal Issues

  1. 1 Whether injunction restraining encashment of unconditional bank guarantees can be granted when no allegation of fraud or irretrievable harm is made
  2. 2 Applicability of principle of unjust enrichment to encashment of bank guarantees

Ratio Decidendi

Injunctions restraining encashment of bank guarantees should only be granted in clear cases of established fraud or irretrievable harm; mere allegation in pleadings without particulars is insufficient. The High Court erred by granting injunction without reference to settled Supreme Court law and by invoking unjust enrichment, which does not apply to guarantee encashment.

Court Disposition

Appeal allowed; judgment and order of Allahabad High Court set aside; order of trial court dismissing injunction application restored.

Orders

  • Allahabad High Court order in C.R. No. 257 of 1996 dated 10th September, 1996 is set aside.
  • Order of trial court dated 20th August, 1996 dismissing injunction application restored.