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"Bank Guarantees are not provided for framing and displaying in a drawing-room:" The Delhi High Court is a court in Delhi, India. Bank guarantees must be free of judicial intrusion, according to the Court, or faith in domestic and international trade will be irrevocably destroyed. The Delhi High Court ruled this week that, unless in situations of fraud, irreversible injustice, or unique equities, the court would not intervene in the invocation or encashment of a "bank guarantee," as long as the invocation is done in accordance with the conditions of the guarantee (SPML Infra Ltd. vs. Hitachi India Ltd. & Anr.).
Bank guarantees must be free of judicial intrusion, according to Justices Manmohan and Navin Chawla of the Division Bench, or faith in domestic and international trade would be irrevocably destroyed. "Prima facie, this Court believes that Bank Guarantees are not given for the purpose of being picture framed and displayed in a drawing-room," the Court stated.
The Supreme Court's judgement in U.P. Cooperative Federation Ltd. vs. Singh Consultants and Engineers (P) Ltd., as well as the Supreme Court's decision in Andhra Pradesh Pollution Control Board vs. CCL Products (India) Limited, enunciated the legal sanctity and meaning of the term "bank guarantee." "We believe that the Court cannot enjoin the encashment of a bank guarantee while it is still effective if a cause of action develops afterwards." The Court noted that "a bank guarantee has a significance and legal integrity linked to it." The Court clarified the well-established stance in this respect after reviewing a plethora of precedents.
"The Court should not intervene with the invocation or encashment of a bank guarantee unless there is a case of fraud, irreversible injustice, or unique equities," the ruling stated. In support of his claim, he pointed the Court to a single-judge order dated July 22, 2021, issued in a similar case involving the same parties. The High Court, on the other hand, opined that the single-judge in the July 22 ruling used the phrase "the decision has been made in consideration of the parties' agreement." The High Court stated, "There is no judicial judgement that a Bank Guarantee cannot be encashed during its validity."
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