AIR 1996 SUPREME COURT 2268 ::1996 AIR SCW 2861 ::1996 (29) Arbi LR 484 ::(1997) 3 ComLJ 44 ::(1996) 29 ArbiLR 484 ::(1996) 3 CivLJ 503 ::1996 (5) SCC 34 ::1996 ( ) All CJ 1250 ::1996 (2) BankCas 231 ::1996 (2) APLJ 53 ::1996 (87) Com Cas 344 ::(1996) 2 IJR 808 (SC) ::1996 (2) IJR 808 ::(1996) 2 LJR 388 ::1996 (3) BankLJ 1 ::(1996) 6 JT 295 (SC)

Supreme Court Of India

(From : Andhra Pradesh)*

Hon'ble Judge(s): S. C. Agrawal, G. T. Nanavati , JJ

(A) Contract Act (9 of 1872) , S.126— Bank guarantee - Nature of - Unconditional Bank guarantee - Bank's obligation is absolute - No distinction can be drawn between the guarantee for due performance of works contract or towards security deposit - Obligation of Bank remains same - Has to be discharged in manner provided in Bank guarantee. C.R.P. Nos. 3865 and 3866 of 1989, D/- 28-12-1989 (Andh Pra), Reversed. A bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the primary contract between the person at whose instance the bank guarantee is given and the beneficiary. In case of an unconditional bank guarantee the nature of obligation of the bank is absolute and not dependent upon any dispute or proceeding between the party at whose instance the bank guarantee is given and the beneficiary. Whether the bank guarantee is towards security deposit or mobilization advance or working funds or for due performance of the contract if the same is unconditional and if there is a stipulation in the bank guarantee that the bank should pay on demand without a demur and that the beneficiary shall be the sole judge not only on the question of breach of contract but also with respect to the amount of loss or damages, the obligation of the bank would remain the same a....