When Bank Guarantee is not issued in favour of disputed contract, Relief of Injunction restraining opponent from encashing such guarantee should have to be granted, as per Apex Court
Civil Appeal No. 4814 of 2016
Bench: Justice J. Chelameswar; Justice Abhay Manohar Sapre
Case Brief: Here, in this appeal, the final judgement and order passed by the High court is in challenge, whereby that Court had dismissed the appeal of the Appellant here, and the decision of the District Judge by which that court had refused to grant an interim injunction restraining the encashment of the Bank Guarantee by the respondents herein, was upheld by the High Court. In the facts of the case, as there was a dispute between the appellant and respondents, the matter was taken to the arbitration. Besides, the appellant earlier preferred an application under section 9 of the Arbitration and conciliation Act, 1996 before the District Judge and sought injunction on encashment of the Bank Guarantee deposited by it against the respondents. Moreover, the said application was allowed by the District judge by order of 2012 and that order was not challenged by the respondent and as such it has attained finality. However, thereafter, the respondent again initiated actions for encashing the said bank guarantee, as such appellant again preferred the said application, but this time, the District Judge rejected his application and as such the grant of injunction was declined by that judge. As such the appeal is preferred by the Appellant, which was dismissed by that court.
Thus, now the bench observed, after perusal of the records in the case and also after considering the Apex Court’s analyse in the similar case of Union of India Vs. Raman Iron Foundry, (1974) 2 SCC 231, that the Arbitration Proceedings in relation to the contract were still pending and also sum claimed by the respondents from the appellant did not related to the contract for which the Bank Guarantee had been furnished, but it relates to another contract for which no bank guarantee had been furnished. And in the nature of damage, the sums claimed by respondents from Appellant was not adjudicated upon in arbitration proceedings. As such, this bench observed that the respondents having no right to encash the said bank Guarantee in question. Thus, this bench held that the courts below erred in dismissing the appellant’s application for grant of injunction. Thus, the appellant is succeeded as per Bench, for the grant of injunction against the respondents. As such the appeal is allowed by this bench, and also the impugned order and was set aside by his bench.
Read the Judgment: M/S Gangotri Enterprises Ltd. Vs Union of India & Ors