GUJARAT MARITIME BOARDversusL&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. AND ANOTHER

                            [2016] 8 S.C.R. 692



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

B                     (Civil Appeal No. 9821 of2016)
                          SEPTEMBER 28, 2016
            [KURIAN JOSEPH AND R. F. NARIMAN, JJ.]
          Writs:
c        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
  the appellant-guarantee, there was a written demand for invoking
E 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.
F
         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
H
                                   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              E
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.                                             F
       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)         G
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
                                                                         H
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 that the first respondent has failed to perform its
      obligations as covenanted, the appellant cancelled the Loi and
      resultantly invoked the bank guarantee. Whether the cancellation
B
      is legal and proper, and whether on such cancellation, the bank
      guarantee could have been invoked on the extreme situation of
      the first respondent justifying its inability to perform its obligations
      under the Loi, etc., are not within the purview of an inquiry under
      Article 226 of the Constitution of India. Between the bank and
C     the appellant, the moment there is a written demand for invoking
      the bank guarantee pursuant to breach of the covenants between
      the appellant and the first respondent, as satisfied by the
      appellant, the bank is bound to honour the payment under the
      guarantee. [Para 13] [703-G-H; 704-A-C]
D            Joshi Technologies International Inc. v. Union of India
            and others (2015) 7 SCC 728: 2015 (6) SCR 1042 -
            referred to.
                               Case Law Reference
      2015 (6) SCR 1042                  referred to                  Para 10
E     2()Q7 (8) SCR 869                   referred to                 Para 12
         CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9821
  of2016.
         From the Judgment and Order dated I 7.02.2016 and 18.02.2016
  of the High Court of Gujarat atAhmedabad in Special Civil Application
F No.4870of2015.
         Mukul Rohatgi, AG, Tushar Mehta, ASG, Gursharan H. Virk, Nakul
  Mohta, Ms. Misha Rohatgi Mohta, Shashibhushan P. Adgaonkar, Advs.
  for the Appellant.
         Gopal Jain, Sr. Adv., Devashish Bharuka, Chinmayee Chandra,
G Ms. Arpita Bishnoi, Vaibhav Niti, Ravi Bharuka, Advs. for the
  Respondents.
         The Judgment of the Court was delivered by
            KURIAN, J.: 1. Leave granted.

H
            2. Whether the High Court is justified in exercising its discretional)'
 GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE                                  695
     DEVELOPMENT PROJECTS LTD. [KURIAN, J.]

jurisdiction under Article 226 of the Constitution oflndia for restraining     A
the appellant from invoking an unconditional bank guarantee executed
by the first respondent, is the main issue arising for consideration in this
case.
       3. The appellant invited bids for development ofSutrapada Port.
In the process, a Letter oflntent (hereinafter referred to as 'Lol') was B
issued to the first respondent on 06.02.2008. The relevant conditions of
Lol are extracted below:
       1. 7 The Lead Promoter shall submit a detailed project report within
       12 months of issue of this Letter oflntent (LOI) and present it to
       Gujarat Maritime Board for their approval.                              c
       1.8 The Lead Promoter shall obtain all environment clearances
       and coastal regulation zone (CRZ) clearances and effective
       financial closure and all such other clearances and permissions
       within 18 months or issue of this Letter oflntent
       1.9 A Performance Guarantee/Bank Guarantee of Rs 5 Crores D
       (Rupees Five crores only) shall be submitted to Gujarat Maritime
       Board within 4 weeks of issue of this Letter of Intent in the
       Performa annexed herewith. (Annexure I). This perfonnance/bank
       guarantee is against the submission of Detailed Project Report
       within 12 months and obtaining environment clearance, coastal
       regulation zone clearance and effecting financial closure within E
       18 months as mentioned in para 1.7 and 1.8 above, failing which
       Gujarat Maritime Board/Government shall cancel this Letter of
       Intent and bank guarantee shall be forfeited."
       4. On 07.05.2010, the first respondent requested for change of
location from Sutrapada to Kachchigarh and the bank guarantee was               F
extended. At the instance of the first respondent, the Yes Bank Limited
furnished a bank guarantee to the appellant on 26.11.2011 for an amount
ofRs.5 crores. The relevant conditions read as follows:
       "
       (a) We, YES BANK Ltd. do hereby guarantee and undertake to               G
       pay to GMB an amount not exceeding Rs 5,00,00,000/- (Rupees
       Five Crores only) as against breach by the Lead Promoter for the
       development of Kachchigarh Port. The decision of GMB as to
       any breach having been committed and loss/damages caused or
       suffered shall be absolute and binding on us.
                                                                               H
696           SUPREME COURT REPORTS                            [2016] 8 S.C.R.


A          (b) We, YES BANK Ltd, do hereby undertake to without any
           reference to the Lead Promoter or any other person and
           irrespective of the fact whether any dispute is pending between
           GMB and the Lead Promoter or any court ofTribunal or arbitrator
           relating thereto, pay the amount due and payable under this
           guarantee without any demur, merely on demand from GMB stating
 B
           that the said Lead Promoter's failure to perform the covenants of
           the same. Any such written demand made by GMB on the Bank
           shall be conclusive, absolute and unequivocal as regards the amount
           due and payable by the Bank under this guarantee. However,
           Bank's liability under this guarantee shall be restricted to an amount
 c         not exceeding Rs 5,00,00,0001-(Rupees Five Crores only)."
        5. It appears, the first respondent could not proceed with the
  work even at Kachchigarh, and on such intimation, the appellant by letter
  dated 10.03.2015, cancelled the Loi issued to the first respondent. The
  communication dated I 0.03.2015 cancelling the Loi to the extent relevant,
D reads as follows:
         "This is with reference to your above mentioned letter informing
         GMB about your inability to develop a port at Kachchigarh due to
         presence of corals not seeking any further extension of the LOI.
         In this regard, it is hereby informed that your admission on failure
E        in taking up the Project is in breach of the conditions set out in the
         Letter of Intent dated 6.2 .2008. At your request, the proposal for
         cancellation of Letter of Intent issued to Mis. L&T Ltd. for
         development ofKachchigarh port was laid before the Board and
         was further submitted to GOG for its decision in the matter. After
         much deliberations, the Government of Gujarat has vide its letter
F        dated February 23, 2015 accorded its approval to (a) cancel the
         Letter ofintent to Mis L& T Ltd. for development of Kachchigarh
         port and (b) forfeit the Bank Guarantee worth Rs.5 crores
         submitted by the Company.
         In view of the above direction of the Government, the Letter of
G        Intent dated 06.02.2008 issued to you for development of
         Kachchigarh port (earlier Sutrapada port) is hereby cancelled.
         Further, the issuing Bank of the Bank Guarantee has been
         informed about GMB's claim on the Bank Guarantee."
           xxx        xxx              xxx              xxx"
 H
 GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE                                697
     DEVELOPMENT PROJECTS LTD. [KURIAN, J.]

       6. On the same day, the appellant also invoked the bank guarantee     A
furnished by the Yes Bank Limited at the instance of the first respondent.
The communication reads as follows:
      "This is with reference to the above mentioned Performance Bank
      Guarantee issued by your bank on behalf of Mis L&T
      Infrastructure Development Projects Ltd.("the Company")                B
      towards securing the fulfilment of conditions set out in the Letter
      oflntent ("LOI") dated 15.07.2010 and having its validity till March
      31, 2015 worth Rs.5,00,00,000/-(Rupees Five crore only) submitted
      to Gujarat Maritime Board (GMB).
      Whereas, in view of breach of the conditions set out in the LOI         c
      by the Company, the Gujarat Maritime Board/Government intends
      to exercise its right in accordance with Clause 1.9 and has decided
      to cancel the Letter of Intent and forfeit the above Bank
      Guarantee.
      I, undersigned hereby put my claim to forfeit the Bank Guarantee        D
      no. 005GM07113300001 dated November 26, 2011 worth Rs. Five
      crores issued by your bank and to reimburse the amount of the
      Bank Guarantee in the account of Gujarat Maritime Board,
      Gandhinagar.
      It is requested to issue Demand Draft in the name of Vice               E
      Chairman & Chief Executive Officer, Gujarat Maritime Board
      payable at Gandhinagar at the earliest."
      7. The first respondent filed a writ petition before the High Court
challenging the cancellation of the Lo I and the invocation of the bank
guarantee. The following are the two main reliefs:
                                                                              F
       "
       (a) That this Hon'ble Court be pleased to issue an appropriate
       writ, order or direction and be pleased to quash and set aside the
       decision dated 23.02.2015 of the respondent no. 2 and the
       consequential decision of the respondent no. I communicated vide       G
       letter of 10.03.2015, to approve the request of the petitioner to
       cancel the Loi issued to the petitioner, with the condition of
       forfeiting the Bank Guarantee worth Rs 5 crores, and further
       command the respondent no. 1 to cancel the LoI dated 06.02.2008
       and return the Bank Guarantee to the petitioner;
                                                                              H
698            SUPREME COURT REPORTS                            [2016] 8 S.C.R.



A           (b) That this Hon'ble Court may be pleased to issue appropriate
            writ, order or direction directing the respondent no. 1 not to encash
            the Bank Guarantee No. 005GM07113300001 dated
            26.11.2011 (extended from time to time) and command the
            respondent no. I to withdraw the letter dated 10.03.2015 addressed
            to Yes Bank invoking the aforesaid Bank Guarantee."
B
            8. By the impugned judgment, the writ petition was allowed.
      Paragraphs-24, 25 and 26 of the impugned judgment which deal with the
      contentions are extracted below:
            "24. Learned counsel for the GMB however, would place much
 c          reliance on the tender conditions in which the tenderer agreed
            that the bidder had made a complete and careful examination to
            determine the difficulties in matters incidental to the performance
            of its obligations under the Concession Agreement and to specify
            the nature and extent of all difficulties and hazards. Counsel would
            therefore, contend that any difficulty or even impossibility in
 D          obtaining environmental clearances cannot be a defence of the
            petitioner to avoid forfeiture of the security deposit. We are unable
            to read such condition in such a rigid manner. If the contract had
            frustrated on account of impossibility, we have serious doubt
            whether GMB could forfeit security deposit citing the reason that
 E          whatever be the reason, the petitioner failed to perform its
            obligations and, therefore, must be visited with the penalty of
            forfeiture. However, there is an additional reason why we must
            reject such a contention. We may recall, the initial project was for
            construction of port at Sutrapada. On account of the respondents
            not being able to make the land available for such project, the
 F          same had to be shelved. Only as an alternative, the petitioner
            suggested Kachchigarh as a site where the port could be
            developed. Surely, the petitioner was not expected tn.carry out
            complete environmental assessment before coming up with such
            an alternative suggestion nor GMB understood the offer of the
 G          petitioner as to one which will irrespective of environment
             concerns, be accepted. When there was a fundamental shift in
            the initial project envisaged in the letter of intent, the contention
            that whatever be the difficulties in executing the contract, forfeiture
            must follow, need to be viewed in the background of such material
            changes.
 H
    GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE                               699
         DEVELOPMENT PROJECTS LTD. [KURIAN, J.)

        25. The contention that having given unconditional bank guarantee, A
        the petitioner cannot avoid encashment thereof, can also not be
        accepted. The parameters for avoiding the payment of a bank
        guarantee by the bank giving such guarantee cannot be applied in
        the present case. The question in the present case is not so much
        as to allowing the authorities to encash the bank guarantee as B
        much as the authority of the GMB to retain such amount even if
        it was so allowed to be encashed. If the decision of GMB to
        cancel the contract and to award the penalty of forfeiture ofRs 5
        crores on the petitioner itselfis found to be erroneous and therefore,
        set aside, the question of allowing GMB to encash the bank
        guarantee would simply not arise.                                      C
        26. In the result, petition is allowed. Impugned communication
        dated l 0.3.2015 is set aside. The respondents shall not encash
        the bank guarantee in question."
       9. Heard Shri Mukul Rohatgi, learned Attorney General for India,
and Shri Tushar Mehta, learned Additional Solicitor General, appearing          D
forthe appellant and Shri Gopal Jain, learned Senior Counsel appearing
for the first respondent.
       I 0. Unfortunately, the High Court went wrong both in its analysis
of facts and approach on law. A cursory reading of Loi would clearly
show that it is not a case of forfeiture of security deposit '"... if the       E
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 guarantee is against the breach        F
by the lead promoter, viz., the 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 in a
proceeding under Article 226 of the Constitution oflndia to go into that        G
question since several disputed questions of fact are involved. Recently,
this Court in Joshi Technologies Internationallnc. v. Union oflndia
and others 1, where one of us (R.F. Nariman, J.) is a member, has
surveyed the entire legal position on exercise of writ jurisdiction in
1
    (2015)1 sec ns                                                              H
700            SUPREME COURT REPORTS                             [2016] 8 S.C.R.


A     contractual matters. The paragraphs which deal with the situation relevant
      to the case under appeal, read as follows:
            "68. The Court thereafter summarised the legal position in the
            following manner: (ABL International Ltd. Case (2004) 3 SCC
            553)
B           "2 7. From the above discussion of ours, following legal principles
            emerge as to the maintainability of a writ petition:
                   (a) In an appropriate case, a writ petition as against a State
                   or an instrumentality of a State arising out of a contractual
                   obligation is maintainable.
                   (b) Merely because some disputed questions of facts arise
                   for consideration, same cannot be a ground to refuse to
                   entertain a writ petition in all cases as a matter of rule.
                   (c) A writ petition involving a consequential relief of
D                  monetary claim is also maintainable.
            28. However, while entertaining an objection as to the
            maintainability of a writ petition under Article 226 of the Constitution
            of India, the court should bear in mind the fact that the power to
            issue prerogative writs under Article 226 of the Constitution is
            plenary in nature and is not limited by any other provisions of the
E
            Constitution. The High Court having regard to the facts of the
            case, has a discretion to entertain or not to entertain a writ petition.
            The Court has imposed upon itself certain restrictions in the
            exercise of this power. (See Whirlpool Corpn. v. Registrar of
            Trade Marks. [(1998) 8 SCC I]) And this plenary right of the
F           High Court to issue a prerogative writ will not normally be exercised
            by the Court to the exclusion of other available remedies unless
            such action of the State or its instrumentality is arbitrary and
            unreasonable so as to violate the constitutional mandate of Article
            14 or for other valid and legitimate reasons, for which the Court
            thinks it necessary to exercise the said jurisdiction."
G
            69. The position thus summarised in the aforesaid principles has
            to be understood in the context of discussion that preceded which
            we have pointed out above. As per this, no doubt, there is no
            absolute bar to the maintainability of the writ petition even in
            contractual matters or where there are disputed questions of fact
H
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE                                701
    DEVELOPMENT PROJECTS LTD. [KURIAN, J.]

   or even when monetary claim is raised. At the same time,                 A
   discretion lies with the High Court which under certain
   circumstances, it can refuse to exercise. It also follows that under
   the following circumstances, "normally", the Court would not
   exercise such a discretion:
   69 .1. The Court may not examine the issue unless the action has          B
   some public law character attached to it.
   69.2. Whenever a particular mode of settlement of dispute is
   provided in the contract, the High Court would refuse to exercise
   its discretion under Article 226 of the Constitution and relegate
   the party to the said mode of settlement, particularly when               c
   settlement of disputes is to be resorted to through the means of
   arbitration.
   69.3. If there are very serious disputed questions of fact which
   are of complex nature and require oral evidence for their
   determination.                                                            D
   69.4. Money claims per se particularly arising out of contractual
   obligations are nonnally not to be entertained except in exceptional
   circumstances.
   70. Further, the legal position which emerges from various
   judgments of this Court dealing with different situations/aspects         E
   relating to contracts entered into by the State/public authority with
   private parties, can be summarised as under~
   70.1. At the stage of entering into a contract, the State acts purely
   in its executive capacity and is bound by the obligations of fairness.
                                                                             F
   70.2. State in its executive capacity, even in the contractual field,
   is under obligation to act fairly and cannot practise some
   discrimination.
    70.3. Even in cases where question is of choice or consideration
    of competing claims before entering into the field of contract,
    facts have to be investigated and found before the question of a         G
    violation of Article 14 of the Constitution could arise. If those
  , facts are disputed and require assessment of evidence the
    correctness of which can only be tested satisfactorily by taking
    detailed evidence, involving examination and cross-examination
    of witnesses, the case could not be conveniently or satisfactorily       H
702            SUPREME COURT REPORTS                          [2016] 8 S.C.R.


A           decided in proceedings under Article 226 of the Constitution. In
            such cases the Court can direct the aggrieved party to resort to
            alternate remedy of civil suit, etc.
            70.4. Writ jurisdiction of the High Court under Article 226 of the
            Constitution was not intended to facilitate avoidance of obligation
B           voluntarily incurred.
            70.5. Writ petition was not maintainable to avoid contractual
            obligation. Occurrence of commercial difficulty, inconvenience
            or hardship in performance of the conditions agreed to in the
            contract can provide no justification in not complying with the
C           terms of contract which the parties had accepted with open eyes.
            It cannot ever be that a licensee can work out the licence if he
            finds it profitable to do so: and he can challenge the conditions
            under which he agreed to take the licence, if he finds it
            commer~ially inexpedient to conduct his business.

D           70.6. Ordinarily, where a breach of contract is complained of, the
            party complaining of such breach may sue for specific
            performance of the contract, if contract is capable of being
            specifically performed. Otherwise, the party may sue for
            damages."
 E           11. It is contended on behalf of the first respondent that the
      invocation of Bank Guarantee depends on the cancellation of the contract
      and once the cancellation of the contract is not justified, the invocation
      of Bank Guarantee also is not justified. Weare afraid that the contention
      cannot be appreciated. The bank guarantee is a separate contact and is
      not qualified by the contract on performance of the obligations. No doubt,
 F    in terms of the bank guarantee also, the invocation is only against a
      breach of the conditions in the Loi. But between 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.
            12. An injunction against the invocation of an absolute and an
G     unconditianal bank guarantee cannot be granted except in situations of
      egregious fraud or irretrievable injury to one of the parties concerned.
      This position also is no more res integra. In Himadri Chemicals
      Industries Limited v. Coal Tar Refining Company2 , at paragraph -14:

H     '(2007J s sec 110
 GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE                                      703
     DEVELOPMENT PROJECTS LTD. [KURIAN, J.]

      "14. From the discussions made hereinabove relating to the                   A
      principles for grant or refusal to grant of injunction to restrain
      enforcement of a bank guarantee or a letter of credit, we find that
      the following principles should be noted in the matter ofinjunction
      to restrain the encashment of a bank guarantee or a letter of
      credit:
                                                                                   B
         (i) While deaiing with an application for injunction in the course
         of commercial dealings, and when an unconditional bank
         guarantee or letter of credit is given or accepted, the beneficiary
         is entitled to realise such a bank guarantee or a letter of credit
         in terms thereof irrespective of any pending disputes relating
         to the terms of the contract.
                                                                                   c
          (ii) The bank giving such guarantee is bound to honour it as
          per its terms irrespective of any dispute raised by its customer.
          (iii) The courts should be slow in granting an order of injunction
          to restrain the realisation of a bank guarantee or a letter of           o
          credit.
          (iv) Since a bank guarantee or a letter of credit is an
          independent and a separate contract and is absolute in nature,
          the existence of any dispute between the parties to the contract
          is not a ground for issuing an order of injunction to restrain            E
          enforcement of bank guarantees or letters of credit.
          (v) Fraud of an egregious nature which would vitiate the very
          foundation of such a bank guarantee or letter of credit and the
          beneficiary seeks to take advantage of the situation.
          (vi) Al lowing encashment of an unconditional bank guarantee              F
          or a letter of credit would result in irretrievable harn1 or injustice
          to one of the parties concerned."
      13. 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            G
bank guarantee and the bank should honour it ... "ll'ithout any de11n11;
merely on a demand from GMB (appellant) stating that the said
lead promoter failed to pe1for111 the covenants ... ". It has also been
undertaken by the bank that such written demand from the appellant on
the bank shall be ... "conclusive, abs(l/ute and unequivocal as regards
                                                                                   H
704                SUPREME COURT REPORTS                        [2016] 8 S.C.R.



A     the amount due and payable by the bank under this guarantee".·
      Between the appellant and the first respondent, in the event of failure to
      perform the obligations under the Loi dated 06.02.2008, the appellant
      was entitled to cancel the LoI and invoke the bank guarantee. On being
      satisfied that the first respondent has failed to perform its obligations as
      covenanted, the appellant cancelled the Lo I and resultantly invoked the
B
      bank guarantee. Whether the cancellation is legal and proper, and whether
      on such cancellation, the ba.nk guarantee could have been invoked on
      the extreme situation of the first respondent justifying its inability to
      perform its obligations under the Loi, etc., are not within the purview of
      an inquiry under Article 226 of the Constitution of India. Between the
c     bank and the appellant, the moment there is a written demand for invoking
      the bank guarantee pursuant to breach of the covenants between the
      appellant and the first respondent, as satisfied by the appellant, the bank
      is bound to honour the payment under the guarantee.
              14. Therefore, the appeal is allowed and the impugned judgment
D     is set aside. However, we make it clear that this judgment will not stand
      in the way of the first respondent working out its grievances in appropriate
      proceedings as permitted under law.
      Ankit Gyan                                                    Appeal allowed.