Business Laws

Unconditional BG

| Updated on February 21, 2021

The High Court of Delhi has held that invocation of a bank guarantee cannot be stopped merely on the grounds that there are disputes pending between the parties. In Shapoorji Pallonji Vs The Indure, the respondent (The Indure) invoked the performance bank guarantee given by Shapoorji Pallonji — its case was that Shapoorji Pallonji had faltered in performance, causing financial injury to it. Shapoorji Pallonji went to court against the BG encashment.

Judge Vibhu Bakhru was clear in his mind that the BG was “unconditional” and therefore was “a separate contract, required to be performed on its own terms”. In such cases, an injunction against its encashment could be passed only in “exceptional cases of egregious fraud”. He declined to stop The Indure from encashing the BG.

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Published on February 21, 2021
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