Courts Cannot Injunct Encashment Of Bank Guarantee During Its Validity: Delhi High Court

[01 Septemeber 2021]

The Delhi High Court remarked that a judicial order cannot be passed that a Bank Guarantee could not be encashed during its validity. A Bench of Justice Manmohan and Justice Navin Chawla added that, “In our view, the Court cannot injunct encashment of a bank guarantee during its validity if a cause of action arises in future. Bank guarantee has a meaning and legal sanctity attached to it.” Reliance was place on the Supreme Court’s observation in U.P. Cooperative Federation Ltd. vs. Singh Consultants and Engineers (P) Ltd., wherein it was held that bank guarantees must be honored free form interference by Courts, otherwise, trust in commerce internal and international would be irreparably damaged.