Bombay High Court
Man Industries (India) Ltd. And Anr. vs G.S. Kumbhar Construction Company And ... on 1 October, 2025
Author: R.I. Chagla
Bench: R.I. Chagla
2025:BHC-AS:42104-DB
Com.Appel-25-2025
Ajay Jadhav
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
COMMERCIAL APPEAL FROM ORDER NO. 25 OF 2025
MAN Industries (India) Ltd. & Anr. ... Appellants
V/s.
G. S. Kumbhar Construction
Company & Anr. ... Respondents
with
JYOTI
PRAKASH
PAWAR INTERIM APPLICATION NO. 11969 OF 2025
Digitally signed by IN
JYOTI PRAKASH
PAWAR COMMERCIAL APPEAL FROM ORDER NO. 25 OF 2025
Date: 2025.10.03
13:16:23 +0530
MAN Industries (India) Ltd. & Anr. ... Applicant
In the matter between
MAN Industries (India) Ltd. & Anr. ... Appellants
V/s.
G. S. Kumbhar
Construction Company & Anr. ... Respondents
_______________________________________
Mr. Ashish Kamat, senior counsel, Mr. Harsh Moorujani a/w Mr. Jay
Javeri, Ms. Tavleen Saini, Ms. Kshamaya Daniel, Mr. Suraj Agrawal
i/b. M/s. Crawford Bayley & Co. for the Appellants.
Mr. Tejas Dande a/w Mr. Bharat Gadhvi i/b Mr. Aniket Shitole for
Respondent No. 1
_______________________________________
CORAM : R.I. CHAGLA AND
FARHAN P. DUBASH, JJ.
RESERVED ON : 24th SEPTEMBER 2025
PRONOUNCED ON : 1st OCTOBER 2025
1/16
::: Uploaded on - 03/10/2025 ::: Downloaded on - 04/10/2025 01:08:38 :::
Com.Appel-25-2025
Ajay Jadhav
JUDGMENT :
(Per FARHAN P. DUBASH, J.)
1. This is an appeal filed under Section 13(1A) of the
Commercial Courts, Commercial Division and Commercial
Appellate Division of High Court Act, 2015 against the ex-parte
injunction order dated 8th September 2025 (impugned order)
passed in Commercial Suit No. 46 of 2025 by the District Judge
(Commercial Court), Pune (trial court). Appellant Nos. 2 to 5 are
the officers of Appellant No. 1 with whom Respondent No. 1 has a
contractual relationship for manufacture and supply of large
diameter MS HSAUU quoted pipes. Respondent No. 2 is the bank
who has issued the bank guarantee, the encashment of which is
subject matter of the controversy in the trial court which passed
the impugned order that is under challenge in the appeal before
us.
2. By the impugned order, the trial court has interalia
injuncted the encashment of the bank guarantee issued by
Respondent No. 2 bank which has been challenged by the
Appellants. In the premises and considering the nature of the
challenge and the submissions made before this Court, we have
proceeded to hear the appeal finally at this stage itself. The
relevant factual position that is necessary to be considered by this
Court for deciding this appeal is set out hereunder:
Com.Appel-25-2025
Ajay Jadhav
3. Respondent No. 1 - G. S. Kumbhar Construction
Company, (Kumbhar) issued a purchase order dated 22nd
February 2024 under which, Appellant No. 1 - MAN Industries
(India) Ltd. (MAN) was required to manufacture and supply large
diameter MS HSAUU quoted pipes to it, on the terms and
conditions, more particularly contained therein. This purchase
order came to be subsequently revised on 12 th July 2024. The
record reveals that pursuant to the said purchase orders, MAN
manufactured the said pipes and also made some deliveries to
Kumbhar from time to time. To that effect, there is also some to
and fro communication between the said parties wherein, MAN has
sought release of its pending payment and confirmation from
Kumbhar, on the listing schedules of the balance stock of pipes
whereas, on the other hand, Kumbhar has alleged that MAN failed
to make the deliveries, as agreed under the said purchase orders.
For the purposes of deciding the appeal before us, this Court is not
going into the merits of the inter-sé allegations between the
parties and the disputes between them, but is recording the
factual position that has transpired till date, for completeness of
the record.
4. On 13th December 2024, Kumbhar's bankers,
Respondent No. 2 - HDFC Bank Ltd. (HDFC) issued an irrevocable
Com.Appel-25-2025
Ajay Jadhav
and unconditional bank guarantee in favour of MAN for a sum of
Rs. 6 crores. Though this bank guarantee was scheduled to expire
on 10th March 2025, the same was extended from time to time and
it is now valid till 10th December 2025.
5. On 25th August 2025, MAN addressed a letter to HDFC
invoking the bank guarantee and sought payment of the sum of
Rs. 6 crores. However, by its subsequent correspondence dated
28th August 2025, which is stated to have been issued at the
request of Kumbhar and with a view to enable the parties to
explore a settlement between them, MAN instructed HDFC to hold
the encashment of the bank guarantee, without prejudice to its
rights.
6. Since no settlement was forthcoming, by a further letter
dated 9th September 2025, MAN instructed HDFC to proceed with
encashment and honoring the bank guarantee. However, by a
letter addressed the following day viz. 10 th September 2025, HDFC
responded to MAN and informed them of the order dated 8 th
September 2025 passed by the District Judge, (Commercial Court)
Pune, in Commercial Suit No. 46 of 2025 (impugned order),
whereunder it was restrained from encashing the said bank
guarantee.
Com.Appel-25-2025
Ajay Jadhav
7. Mr. Ashish Kamat, learned senior counsel appearing on
behalf of MAN invites our attention to the impugned order and
submits that the same is not only ex-facie contrary to law and but
it has been passed behind the back of his clients and also without
any notice to them. He submits that neither did Kumbhar serve a
copy of the plaint or any other papers filed in the trial court nor
was any notice given to his clients that Kumbhar would be
applying for any such urgent ad-interim reliefs before the
impugned order came to be passed. In fact, he points out that this
position is undisputed and has also been recorded in the impugned
order itself and despite such position, the trial court has proceeded
to hear Kumbhar's application and pass the impugned order which,
he submits, is in the teeth of the most fundamental principles of
natural justice.
8. Additionally, he submits that the impugned order which
injuncts the encashment of the bank guarantee has been passed
contrary to a catena of decisions of the Supreme Court, this Court
and several other High Courts in the country which expressly
deprecate interference of courts in this process and have laid down
the twin test that is required to be satisfied before any injunction
can be granted.
Com.Appel-25-2025
Ajay Jadhav
9. Mr. Kamat is at pains to submit that neither of the said
two grounds were raised or satisfied by Respondent No. 1 in the
suit filed in the trial court nor were they considered in the
impugned order and the only point which appears to have weighed
with the trial court in passing the impugned order was Kumbhar's
willingness to deposit the amount of Rs. 6 crores in court which
was the amount equivalent to the amount of the bank guarantee
and which deposit is stated to have been subsequently made by
Kumbhar in accordance with the impugned order.
10. Mr. Kamat also submits that the trial court viz. District
Judge (Commercial Court) at Pune has no jurisdiction to entertain
the suit filed by Kumbhar. In this connection, our attention is
invited to paragraph 30 of the plaint which contains the jurisdiction
clause basis which, Kumbhar has filed the said commercial suit in
Pune. A perusal thereof reveals that the jurisdiction of the Pune
Court has been invoked, relying on the jurisdiction clause
contained in the purchase order issued by Kumbhar and on
account of the fact that it carries on business within the
jurisdiction of the said Pune Court.
11. Mr. Kamat submits that notwithstanding the insertion of
this clause in the purchase order, a suit for injunction to restrain
the encashment of a bank guarantee would be governed by the
Com.Appel-25-2025
Ajay Jadhav
terms of such bank guarantee and not the purchase order which
otherwise governs the contractual relationship between the said
parties. He submits that a bank guarantee is separate and
independent contract between the parties thereto and a perusal of
its terms and conditions of the said bank guarantee dated 13 th
December 2024 issued by HDFC reveals an express clause therein
which confers exclusive jurisdiction to courts in Mumbai. He
therefore submits that since the only reliefs sought in the suit
relate to injunction on the encashment of the bank guarantee,
such a suit could never have been filed before the Pune Court and
the Courts in Mumbai would have exclusive jurisdiction to entertain
and decide the same. For all these reasons, Mr. Kamat submits
that the impugned order is liable to be forthwith set aside.
12. In support, Mr. Kamat relies on the decision of the
Supreme Court in Dwarikesh Sugar Industries Ltd. vs. Prem
Heavy Engineering Works (P) Ltd. and Anr. 1 which in turn,
considers several past decisions of the Apex Court spanning across
two decades and lays down the twin test that has since been
followed by courts across the country setting out the two
exceptions which are required to be satisfied before a Court can
injunct the encashment of a bank guarantee. He also relies on the
1 (1997) 6 SCC 450
Com.Appel-25-2025
Ajay Jadhav
decision of a Co-ordinate Bench of this Court in Kisan Sahakari
Chini Mills Ltd. vs. Richardson and Krudas (1972) Ltd. and
Anr2. which explains the second exception of "irretrievable
injustice" (in the twin test) that is required to be considered by the
Court.
13. Mr. Kamat then relies on the judgment of the Supreme
Court in BSES Ltd. (now Reliance Energy Ltd.) vs. Fenner
India Ltd. and Anr.3 wherein it has been held that whilst
considering a prayer seeking injunction against encashment of a
bank guarantee, the Court is required to consider the terms of the
said bank guarantee itself, so as to decide as to when and for what
reason, the bank guarantee should be encashed. Mr. Kamat, also
relies on the Full Bench decision of the Supreme Court in Swastik
Gases Pvt. Ltd. vs. Indian Oil Corporation Ltd. 4 to contend
that the Courts have consistently recognised and enforced the
contractual agreement between parties when they have agreed to
exclude the jurisdiction and/or conferred exclusive jurisdiction on a
Court.
14. Per contra, Mr. Tejas Dande, learned counsel for
Kumbhar has supported the impugned order by contending that
2 1996 (2)Mh.L.J.1010
3 (2006) 2 SCC 728
4 (2013) 9 SCC 32
Com.Appel-25-2025
Ajay Jadhav
the same was passed in the peculiar facts and circumstances of
the case. He further submits that by the impugned order, no
prejudice whatsoever is caused to MAN, inasmuch as, his clients
have immediately deposited the sum of Rs. 6 crores, which is the
amount equivalent to the value of the bank guarantee in the trial
court the very next day, in compliance. He further submits that
since the impugned order was passed without hearing MAN, his
client is agreeable to go back to the trial court and re-argue their
application for injunction, restraining the encashment of the bank
guarantee afresh, this time after giving an opportunity to MAN to
file its response thereto and making oral submissions on the same,
but till then, the impugned order ought not to be set aside. He
argues that the claim of MAN is secured since the amount of Rs. 6
crores is lying deposited in the trial court and as a result, no
prejudice would be caused to it if such a workable order is passed.
15. Mr. Dande, invited our attention to the recent decision
of the Supreme Court in Jindal Steel and Power Ltd and Anr.
vs. Bansal Infra Projects Pvt. Ltd. and Ors. 5 to counter the
submissions of Mr. Kamat and contends that in an appropriate
case, even the Supreme Court has permitted an injunction
restraining the encashment of a bank guarantee, pending
5 (2025) SC 1045
Com.Appel-25-2025
Ajay Jadhav
determination of the application in that regard being decided on
merits.
16. We have heard both parties and with their able
assistance, also perused the record. At a first blush, the suggestion
made by Mr. Dande to send the matter back to the trial court to
hear both the parties and then re-decide Kumbhar's application to
restrain encashment of the bank guarantee seems fair. However,
on a careful consideration of the well settled judicial
pronouncements and in light of the facts in the present case, we
are unable to accept it.
17. The law on injunctions restraining the encashment of
bank guarantees is well settled by a plethora of decisions, not only
by the Apex Court but also by several High Courts in the country
including this Court. In all these decisions, the underlying factor
that has weighed with the Courts is that bank guarantees are the
life-blood of international commerce and must be honored free
from interference by courts unless there is established 'fraud' or
'irretrievable injustice'. All the judgments on this topic have
reiterated that courts should ordinarily restrict themselves from
injuncting encashment of bank guarantees. It has been repeatedly
held that the commitment of banks must be honoured, free from
the interference of Courts and an irrevocable commitment in the
Com.Appel-25-2025
Ajay Jadhav
form of a confirmed bank guarantee ought not to be interfered
with, otherwise trust in commerce, both internal and international
would be irreparably damaged and if such injunctions are readily
granted, the whole banking system in the country would fail.
18. In the cited Full Bench decision in Dwarikesh Sugar
Industries (supra), the general principle that was laid down and
summarized in UP State Sugar Corporation vs. Sumac
International Ltd.6 was set out. The same is beneficially
reproduced hereunder:
"The law relating to invocation of such bank
guarantees is by now well settled. When in
the course of commercial dealings an
unconditional bank guarantee is given or
accepted, the beneficiary is entitled to
realize such a bank guarantee in terms
thereof irrespective of any pending disputes.
The bank giving such a guarantee is bound
to honour it as per its terms irrespective of
any dispute raised by its customer. The very
purpose of giving such a bank guarantee
would otherwise be defeated. The courts
should, therefore, be slow in granting an
injunction to restrain the realization of such
a bank guarantee. The courts have carved
out only two exceptions. A fraud in
connection with such a bank guarantee
would vitiate the very foundation of such a
bank guarantee. Hence if there is such a
fraud of which the beneficiary seeks to take
the advantage, he can be restrained from
6 (1197) 1 SCC 568
Com.Appel-25-2025
Ajay Jadhav
doing so. The second exception relates to
cases where allowing the encashment of an
unconditional bank guarantee would result
in irretrievable harm or injustice to one of
the parties concerned. Since in most cases
payment of money under such a bank
guarantee would adversely affect the bank
and its customer at whose instance the
guarantee is given, the harm or injustice
contemplated under this head must be of
such an exceptional and irretrievable nature
as would override the terms of the
guarantee and the adverse effect of such an
injunction on commercial dealings in the
country."
19. Thus, there are two exceptions under which a court is
permitted to restrain the encashment of a bank guarantee. The
first exception is when there is an egregious fraud that has been
shown to exist in connection with the bank guarantee itself which
would vitiate its very foundation; whereas, the second exception
relates to cases where allowing its encashment would result in
irretrievable injury which has been further explained to mean such
a circumstance which would make it impossible for the guarantor
to recover the amount from the beneficiary through restitution, if
the party ultimately succeeds and this position must be proved to
the satisfaction of the Court. Now, if this twin test is applied to the
facts of the present case, it is ex-facie evident that the same is not
met. A bare perusal of the impugned order reveals that it neither
Com.Appel-25-2025
Ajay Jadhav
deals with nor considers, either of these two exceptions. This is
naturally so because no such allegations of fraud and irretrievable
injury have even been raised by Kumbhar in the suit filed before
the trial court, which position is evident from a perusal of the
plaint. The only dispute raised by Kumbhar therein, relates to the
non-performance of the terms and conditions of the purchase
orders by MAN and nothing more. The trial court failed to
appreciate that the bank guarantee constitutes an independent
contract between HDFC and MAN, completely divorced from the
underlying commercial dispute between Kumbhar and MAN arising
from the purchase orders. Mere contractual disputes or
apprehension of loss cannot constitute the high threshold of
'egregious fraud' required to vitiate the entire underlying
transaction. 'Irretrievable injustice' has also not been established
to the standard required by judicial precedents. This Court is of the
opinion that such judicial interference, as shown by the trial court
in the present case, undermines commercial confidence and the
very purpose for which bank guarantees serve as the backbone of
commercial transactions. In the premises, this Court holds that the
impugned order cannot be sustained and is liable to be set aside
forthwith.
20. The reliance on the decision of Jindal Steel (supra) by
Com.Appel-25-2025
Ajay Jadhav
Mr. Dande is entirely misplaced inasmuch as, in the facts of that
case, the order impugned before the Supreme Court was passed
after hearing both the parties and with their consent. This is
admittedly not so, in the present case and therefore, this judgment
can be distinguished on the peculiar facts that existed in its case
and the same will not be of any assistance to Kumbhar.
21. The impugned order appears to have been passed by
the trial court on the basis of an erroneous presumption that since
Kumbhar had voluntarily agreed to deposit the entire amount of
Rs. 6 crores, being the amount equivalent to the value of bank
guarantee, in Court the very next day, an injunction restraining the
encashment of the bank guarantee would not prejudice MAN. In
doing so, the trial court has lost sight of the very basic
characteristic of an unconditional and irrevocable bank guarantee
which is that the same can be invoked at the volition of the
beneficiary thereto and dehors any contractual dispute that may
be raised by the other contracting party thereto. In such a
scenario, the beneficiary is entitled to the monies under the bank
guarantee without any need and/or requirement of explaining and
justifying such invocation in a court of law. By the impugned order,
the trial court has necessarily required MAN to approach the
Commercial Court at Pune and make out a case satisfying it as to
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Ajay Jadhav
why the amount of Rs. 6 crores under the said bank guarantee
should be paid over to it. This is wholly unique and unknown to law
and not only entirely impermissible but also contrary to well
settled judicial precedents.
22. We also find favour with the submission of Mr. Kamat
that Kumbhar has deliberately obtained the impugned order
behind his client's back. A perusal of the first paragraph of the
impugned order reveals that, though the trial court had earlier
passed an order of issuance of notices to all the Defendants
therein, including MAN, Kumbhar had not served the papers and
proceedings of the said suit on MAN. In fact, it is revealed that
Kumbhar did not even apply for the service of the suit summons
and notices to MAN by Registered Post A.D. (RPAD) or e-mail and
an application for the same was made on the very same date on
which the impugned order was passed. Hence, this position clearly
reveals that Kumbhar has intentionally orchestrated a scenario
where MAN is prevented from appearing before the trial court at
the time when its application for injunction restraining the
encashment of the bank guarantee is made and decided. The
reason for such conduct appears to be obvious inasmuch as, if
MAN had appeared before the trial court and urged the grounds
that are raised before us today, the trial court might not have
Com.Appel-25-2025
Ajay Jadhav
passed the impugned order restraining the encashment of the
bank guarantee.
23. Since the impugned order is vitiated on the two grounds
recorded above, this Court is not inclined to comment upon the
issue of jurisdiction (or lack thereof) of the trial court in deciding
the suit and all rights and contentions of both parties are expressly
kept open to be urged and decided in the trial court.
24. In these circumstances, the Appeal is allowed and the
following order is passed:
:: ORDER ::
(i) Commercial Appeal No. 25 of 2025 is hereby allowed and the
impugned order dated 8th September 2025 passed by the District
Judge (Commercial Courts), Pune in Commercial Suit No. 46 of
2025 is hereby set aside.
(ii) As a result, Interim Application No. 11969 of 2025 is also
disposed of in terms of the above order.
(iii) There shall be no order as to costs.
( FARHAN P. DUBASH, J. ) ( R.I. CHAGLA J. )
