How special are “special equities”- Analysis of invocation of bank guarantee during COVID-19

A pandemic, of the nature which affects the world today, has not visited us during the lifetime of any of us and, hopefully, would not visit us hereinafter either. The devastation, human, economic, social and political, that has resulted as a consequence thereof, is unprecedented. The measures, to which the executive administration has had to resort, to somehow contain the fury of the pandemic, are equally unprecedented. The situation of nationwide lockdown, in which we find ourselves today, has never, earlier, been imposed on the country. The imposition of the lockdown was by way of a sudden and emergent measure, of which no advance knowledge could be credited to the petitioner – or, indeed, to anyone else.” – C. Hari Shankar, J., April 20, 2020.

The above quote aptly sums up the current situation globally and domestically. The COVID-19 outbreak has created a void in terms of performance of commercial contracts and has in many cases left the parties on edge. Through this article, we aim to provide an insight into the orders passed by the judiciary during COVID-19, dealing with an otherwise settled issue i.e. the invocation of bank guarantee.
Continue Reading How special are “special equities”- Analysis of invocation of bank guarantee during COVID-19

Injunction against encashment or invocation of Bank Guarantees

 Introduction 

The restraining of the invocation of a bank guarantee has traditionally been one of the less ventured into areas of law. In India as well as in common law, Courts have laid down strict standards and thresholds for judicial intervention, and only in the rarest cases would Courts allow an injunction against invocation of a bank guarantee. This trend, however, is changing and evolving constantly.

A bank guarantee is a written tripartite contract given by a bank (say, A), on behalf of its customer (say, B) in relation to a particular commercial contract with a third-party (say, C). By issuing this guarantee, Bank A takes responsibility of paying a fixed sum of money in case of non-performance of contractual obligations by B towards C.
Continue Reading Injunction against encashment/invocation of Bank Guarantees: evolution of “Fraud” and “Special Equities”