U.P. CO-OPERATIVE FEDERATION LTD. versus SINGH CONSULTANTS & ENGINEERS (P) LTD.

U.P. CO-OPERATIVE FEDERATION LTD. versus SINGH CONSULTANTS & ENGINEERS (P) LTD.

It is well settled that the obligations of a bank under an irrevocable bank guarantee or performance bond are independent. Unless there is established fraud by the beneficiary or irretrievable injustice, courts must not interfere and restrain the invocation or encashment of such guarantees. The respondent failed to make out a case of fraud or irretrievable injustice; thus, injunction is not justified and appellant may invoke the bank guarantees as per the contract.

Parties
Appellant: U.P. CO-OPERATIVE FEDERATION LTD.; Respondent: SINGH CONSULTANTS & ENGINEERS (P) LTD.
Jurisdiction
India
Judgment Date
19 November 1987
Procedural Posture
Civil Appeal / Appeal From Judgment and Order of Allahabad High Court in Civil Revision No. 157 of 1986
Outcome
Appeal allowed
Legal Topics
Performance Guarantee, Bank Guarantees, Injunction, Arbitration Proceedings, Fraud Exception, Irrevocable Documentary Credit
Contract Law Banking Law Arbitration Performance Guarantee Bank Guarantees Injunction Arbitration Proceedings Fraud Exception +1 more

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Parties

U.P. CO-OPERATIVE FEDERATION LTD.

Appellant

SINGH CONSULTANTS & ENGINEERS (P) LTD.

Respondent

Procedural Posture

Civil Appeal / Appeal From Judgment and Order of Allahabad High Court in Civil Revision No. 157 of 1986

Legal Issues

  1. 1 Whether the High Court was justified in restraining the appellant from invoking bank guarantees
  2. 2 Nature and legal effect of performance bank guarantee
  3. 3 Circumstances under which courts can grant injunction restraining invocation of bank guarantee

Ratio Decidendi

It is well settled that the obligations of a bank under an irrevocable bank guarantee or performance bond are independent. Unless there is established fraud by the beneficiary or irretrievable injustice, courts must not interfere and restrain the invocation or encashment of such guarantees. The respondent failed to make out a case of fraud or irretrievable injustice; thus, injunction is not justified and appellant may invoke the bank guarantees as per the contract.

Court Disposition

Appeal allowed

Orders

  • Judgment and order of Allahabad High Court dated February 20, 1987 set aside
  • Order of Civil Judge, Lucknow dated August 8, 1986 restored