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2015 (2) TMI 486 - HC - Indian LawsEncashment of bank guarantee - petitioner submitted that bank guarantees were deposited towards security deposit in terms of clause 9.1 of the GCC - Held that:- There is no dispute to the fact that under Clause 9.1 of GCC the petitioner was required to furnish security deposit. This clause also gives liberty to the petitioner to deposit the security either in cash or in the form of government securities or fixed deposit receipts or bank guarantees furnished by any of the nationalised banks. The petitioner had chosen to furnish the said security deposit in the form of bank guarantees. From the language of the bank guarantee it is apparent that all the bank guarantees are unconditional bank guarantees. The bank has clearly stated “to unconditionally pay the amount claimed by the Corporation on demand and without demur to the extent aforesaid”. The bank guarantees in dispute, clearly in unequivocal terms and unconditionally recite that the amount would be paid without demure or objection. The bank guarantee thus is an independent contract between the bank and the beneficiary and can be challenged only on the ground of fraud and irreparable injury. Petitioner has challenged the invocation of the bank guarantee only on the ground of irreparable injury. The plea of irreparable injury is based on the contentions that the petitioner since having financial problems would suffer irreparable loss, if the respondent be allowed to encash the band guarantees. Whether this constitutes irreparable injury of the nature which is sufficient to restrain the respondent from invoking the bank guarantees is the matter which requires consideration. Now what is an irreparable loss and injury on the basis of which court can restrain the respondents, has been discussed and the principle laid down by the supreme court in the U.P.State Sugar Corporation’s case (1996 (12) TMI 294 - SUPREME COURT OF INDIA). From the principles laid down in the Itek Corporation v. First National Bank of Boston [1983 (6) TMI 203 - UNITED STATES DISTRICT COURT], it is apparent that the petitioner can be said to have suffered irreparable injury if he has been able to show that he shall suffer irreparable harm. - petitioner has failed to bring on record which can show that the petitioner shall suffer an irreparable harm. The petitioner has failed to show that in case he succeeds before the arbitrator, he will not be able to recover the refund of his security amount. It is not his case that the respondent is not financially sound or would not be in a position to refund the decretal amount. Clause 9.1 of GCC clearly contemplates that the security deposit is refundable only on completion of the work and after the engineer-in-charge certifies in writing that the work has been completed as per the condition 31. Admittedly, in the present case the petitioner has only completed work of 35% worth of contract amount and thus in view of clause 9.6 of GCC the petitioner is not entitled for the refund of security deposit and the security deposit is to remain with respondent no.1. For this reason also the petitioner is not entitled for the relief. - Mere pendency of a reference before the arbitrator is also not a ground to issue restrain order to the bank guarantee. Therefore, the pendency of the arbitration proceedings also is not a ground to restrain the respondent no.1 from invoking the bank guarantees. Also in the case of Vinitec Electronics Private Ltd. vs. HCL Infosystems Ltd. reported in [2007 (11) TMI 588 - SUPREME COURT] the Supreme Court has clearly held that the process of the arbitral proceedings is not a ground to restrain the invocation of the bank guarantees especially when there is no allegation that it would be difficult to realise the amount from the respondent. no ground to hold that the petitioner is entitled to any relief. - Decided against Petitioner.
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