HINDUSTAN STEELWORKS CONSTRUCTION LTD. versus TARAPORE AND CO. AND ANR.

HINDUSTAN STEELWORKS CONSTRUCTION LTD. versus TARAPORE AND CO. AND ANR.

Commitments of banks under unconditional guarantees must be honoured free from interference by courts; court interference is justified only in cases of fraud or irretrievable injustice. Special equities or ongoing arbitration by themselves are not sufficient grounds for injunction against bank guarantee encashment.

Parties
Appellant: Hindustan Steelworks Construction Ltd.; Respondent 1: Tarapore and Co.; Respondent 2: Bank of India
Jurisdiction
India
Judgment Date
09 July 1996
Procedural Posture
Civil Appeal / Appeal Against High Court Order (judgment in Civil Revision Petitions Nos. 3865 and 3866 of 1989)
Outcome
Appeals allowed; injunction order restraining enforcement of bank guarantees set aside.
Legal Topics
Bank Guarantee, Injunction, Fraud Exception, Arbitration Proceedings
Contract Law Banking Law Arbitration Bank Guarantee Injunction Fraud Exception Arbitration Proceedings

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Legal principles 2 Authorities cited 15 Party arguments 2 Amounts and remedies 8
Sign in to unlock

Parties

Hindustan Steelworks Construction Ltd.

Appellant

Tarapore and Co.

Respondent 1

Bank of India

Respondent 2

Procedural Posture

Civil Appeal / Appeal Against High Court Order (judgment in Civil Revision Petitions Nos. 3865 and 3866 of 1989)

Legal Issues

  1. 1 Whether courts can restrain the enforcement/encashment of unconditional bank guarantees in the absence of fraud or irretrievable injustice
  2. 2 Whether special equities or circumstances justify injunction restraining enforcement of guarantees
  3. 3 Validity of agreement terms making a party sole judge on quantification of damages

Ratio Decidendi

Commitments of banks under unconditional guarantees must be honoured free from interference by courts; court interference is justified only in cases of fraud or irretrievable injustice. Special equities or ongoing arbitration by themselves are not sufficient grounds for injunction against bank guarantee encashment.

Court Disposition

Appeals allowed; injunction order restraining enforcement of bank guarantees set aside.

Orders

  • Judgment and order of Andhra Pradesh High Court set aside.
  • Appellant not to call upon bank to discharge obligations till 31st July, 1996 if arbitrators' award is expected shortly.