Published on: October 12, 2023 at 00:19 IST
Court: High Court of Allahabad
Citation: UPEIDA V. Sahakar Global Ltd. (2022)
Honourable High Court of Allahabad has explained concept of Bank Guarantee as the contract where in a bank undertakes to pay the Payee Party immediately on demand, without any deductions, set-off or counterclaim whatsoever, any or, all money payable by the Payor Party without any demur, reservation, contest, recourse, cavil, arguments, or protest and/or without any reference to or enquiry from the Payor Party and without the Payee Party needing to prove or show grounds or reasons for their demand for the sum specified therein.
The Bank Guarantee in unequivocal terms says that any demand made by the Payee Party on the Bank shall be conclusive and binding notwithstanding any difference between the Payee Party and the Payor Party or any dispute pending before any Court, Tribunal, Arbitrator or any other authority. It is very much contained in the BG that the Bank has agreed that the Guarantee contained shall be irrevocable and shall continue to be enforceable till the Payor Party discharges this guarantee.
33. Having said so, it has to be understood that the jurisdiction of the Court to interfere, in such cases, is, however, not irrevocably foreclosed and as such the exceptions of egregious fraud, irretrievable injustice, or special equities have been devised by the court to injunct the invocation of the bank guarantee(s).
As to what follows from egregious fraud, the meaning and implications thereof are settled. The Hon’ble Supreme court as far back as some 50 years ago in the case of Union of India v. Chaturbhai M. Patel & Co, (1976) 1 SCC 747 relying on the judgment of Lord Atkin in A.L.N. Narayanan Chettyar v. Official Assignee, High Court, Rangoon, AIR 1941 PC 93 held that “fraud like any other charge of a criminal offence whether made in civil or criminal proceedings, must be established beyond reasonable doubt.” The aspect was further clarified by holding that “however suspicious may be the circumstances, however strange the coincidences, and however grave the doubt, suspicion alone can never take the place of proof.”
The Supreme court in Svenska Handelsbanken v. Indian Charge Chrome, (1994) 1 SCC 502, went on to say that mere pleadings do not make a strong case of prima facie fraud, which had to be shown by “material and evidence”. Thus, fraud must be pleaded and proved and it cannot be presumed.
Drafted By Abhijit Mishra
