National Building Construction ... vs State Bank Of Patiala
1992 Latest Caselaw 376 Del

JUDGMENT

Usha Mehra, J.

(1) It is a well settled principle of law that bank cannot be interdicted from encashing the bank guarantee because that is an independent contract between the beneficiary and the bank, the enforcements of which depends upon the terms and conditions of the bank guarantee. The bank is least concerned with the relation between the parties under the original contract nor with the question whether the guarantee has been invoked rightly or wrongly nor the bank can question the decision of the beneficiary regarding the outstanding amount.

(2) In fact no fraud of the beneficiary has been set up in this case nor special equities have been indicted nor any serious dispute. The defendant No. 2 has denied the existence of the arbitration agreement and it is yet to be determined whether the letter issued by Bureau of Public Enterprises is applicable in this case or not. Therefore, it cannot be stated that there is any serious dispute or that till the arbitrator gives a decision the bank should be restrained from encashing the bank guarantee.