AIR 2007 SUPREME COURT 2798 ::2007 AIR SCW 5080 ::2007 CLC 1506 (SC) ::2007 (3) Arbi LR 139 ::(2007) 2 WLC(SC)CVL 513 ::(2007) 3 ArbiLR 139 ::2007 (8) SCC 110 ::2007 (3) RecCivR 768 ::(2007) 9 Scale 631 ::(2007) 3 CalLT 86 ::(2007) 4 All WC 3438 ::2007 (139) Com Cas 706 ::2007 (4) ICC 215 ::(2007) 4 Raj LW 3500

Supreme Court Of India

(From : Calcutta)*

Hon'ble Judge(s): Tarun Chatterjee, P. K. Balasubramanyan , JJ

Contract Act (9 of 1872) , S.126— Arbitration and Conciliation Act (26 of 1996) , S.9— Bank Guarantee or Letter of Credit - Enforcement of - Injunction against - Principles to be followed - Injunction can be granted only in cases of egregious fraud and irretrievable loss - Existence of dispute between parties to contract - Not ground to grant injunction. The following principles should be noted in the matter of injunction to restrain the encashment of a Bank Guarantee or a Letter of Credit :- (i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional Bank Guarantee or Letter of Credit is given or accepted, the Beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof irrespective of any pending disputes relating to the terms of the contract. (ii) The Bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. (iii) The Courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit. Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing ....