GUJARAT MARITIME BOARD versus L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. AND ANOTHER

Citation: [2016] 8 S.C.R. 692 · Decided: 28-09-2016 · Supreme Court of India · Bench: KURIAN JOSEPH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
c 
[2016] 8 S.C.R. 692 
GUJARAT MARITIME BOARD 
v. 
L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. 
AND ANOTHER 
(Civil Appeal No. 9821 of2016) 
SEPTEMBER 28, 2016 
[KURIAN JOSEPH AND R. F. NARIMAN, JJ.] 
Writs: 
Constitution of India - Art.226 - Writ Jurisdiction in 
contractual matters -Unconditional performance 
bank 
guarantee - Invocation of - Discretionary jurisdiction of High 
Court - Scope of - High Court restrained the appellant-guarantee 
from invoking an unconditional bank guarantee executed by the 
D 
first respondent - Held: Bank guarantee is an independent and 
separate contract betv"een the guarantor-bank and the appellant-
guarantee - Existence of any dispute between the parties to the 
contract not a ground to issue order of injunction to restrain 
enforcement of bank guarantee - Between the guarantor-bank and 
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F 
the appellant-guarantee, there was a written demand for invoking 
the bank guarantee in pursuant to any breach of covenants -
Decision of appellant as to breach was binding on bank to honour 
the payment under the guarantee - Justifiability of such decision 
is a different matter between the appellant and the first 
respondent - High Court not to go in that question u/Art. 226 as 
disputed question of facts are involved - Jurisdiction. 
Allowing the appeal, the Court 
HELD: 1. The High Court went wrong both in its analysis 
of facts and approach on law. A cursory reading of the Loi issued 
by the appellant to the first respondent would clearly show that it 
G is not a case of forfeiture of security deposit " ... if the contract 
had frustrated on account of impossibility ... " but invocation of 
the performance bank guarantee. On law, the High Court ought 
to have noticed that the bank guarantee is an independent 
contract between the guarantor-bank and the guarantee-appellant. 
The guarantee is unconditional. No doubt, the performance 
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692 
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
693 
DEVELOPMENT PROJECTS LTD. 
guarantee is against the breach by the lead promoter, viz., the A 
first respondent. But between the bank and the appellant, the 
specific condition incorporated in the bank guarantee is that the 
decision of the appellant as to the breach is binding on the bank. 
The justifiability of the decision is a different matter between the 
appellant and the first respondent and it is not for the High Court B 
in a proceeding under Article 226 of the Constitution of India to 
go into that question since several disputed questions of fact are 
involved. [Para 10) [699-E-GJ 
2.1 The contention of the first respondent that the 
invocation of Bank Guarantee depends on the cancellation of the C 
contract and once the cancellation of the contract is not justified, 
the invocation of Bank guarantee also is not justified cannot be 
appreciated. The bank guarantee is a separate contract and is 
not qualified by the contract on performance of the obligations. 
No doubt, in terms of the bank guarantee also, the invocation is 
only against a breach of the conditions in the Loi. But between D 
the appellant and the bank, it has been stipulated that the decision 
of the appellant as to the breach shall be absolute and binding on 
the bank. [Para 11) [702-E-F] 
2.2 An injunction against the invocation of an absolute and 
an unconditional bank guarantee cannot be granted except in 
situations of egregious fraud or irretrievable injury to one of the 
parties concerned. 
[Para 12) [702-G] 
Himadri Chemicals Industries Limited v. Coal Tar 
Refining Company (2007) 8 SCC 110: 2007 (8) 
SCR 869 - referred to. 
3. Guarantee given by the bank to the appellant contains 
only the condition that in case of breach by the lead promoter, 
viz., the first respondent of the conditions of Loi, the appellant is 
free to invoke the bank guarantee and the bank should honour it 
••• "witliout any demur, merely on a demand from GMB (appellant) 
stating tliat tlie said lead promoter failed to perform tlie 
covenants •.. ". It has also been undertaken by the bank that such 
written demand from the appellant on the bank shall be ... 
"conclusive, absolute and unequivocal as regards tlie amount due 
and payable by the bank under this l(Uarantee". Betwe~n the 
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F 
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694 
SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
A appellant and the first respondent, in the event of failure to 
perform the obligations under the Loi, the appellant was entitled 
to cancel the Loi and invoke the bank guarantee. On being 
satisfied th

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