G. R. Luthra ( 1 ) THIS judgment disposes of 0. M. P. 62 of 1982 and 1. A. 1719/82. The application (1. A. 17i9/82) is for issue of a temporary injunction restraining the State Bank of Patiala,shardhanand Marg, Delhi from encashment of the bank guarantee given at the instance of M/s. Banwari Lal Radhe Mohan (hereinafter REFERRED TO as the petitioners) in favour of the Punjab State Cooperative Supply and Marketing Federation Limited (hereinafter REFERRED TO and commercially known as MARKFED ). 0. M. P. 62/82 is for issue of a direction to the MARKFED that the latter should not withhold payment of Rs. 24,39)431. 96 during the pendency of the arbitration proceedings between the parlies. ( 2 ) THERE is no dispute in respect of some of the facts. On 14th May, 1981 a contract was entered into between the State Trading Corporation Limited (hereinafter to STC) and M/s. Sulaiman Al-Mohammad Al-Rashid of Saudi Arabia (hereinafter to referred as the foreign buyer) for supply of superior Basmati Sela rice by the former to the latter. STC then entered into some agreements with various parties including MARKFED for the supply of a portion of contracted rice for onward shipment to the foreign buyer. The agreement which was entered into with MARKFED is dated 29th June, 1981. Then MARKFED entered into an agreement dated 16th July, 1981 with the petitioners for supply of 2000 metric tone of superior Basmati Sela rice at the railhead at Delhi in August/september, 1981. According to that agreement, the petitioners had to furnish a bank guarantee to the extent of Rs. 5. 27 Lacs for the performance of the agreement. Accordingly, the petitioner furnished bank guarantee of that amount of State Bank of Patiala,shardhanand Mars;, Delhi. Pursuant to the said agreement, they supplied 1371928. 215 Kgs. of rice. MARKFED paid a sum of Rs. 49,18,286. 74 in satisfaction of the price of the part of the rice supplied by the petitioners, The petitioners made a demand for payment of the balance of Rs. 24,39,431. 96 P. The reply of the MARKFED was that the rice which was supplied was not in accordance with the terms of the contract and that the same was sub-standard on account of which the same was rejected by the foreign buyer. 24,39,431. 96 P. The reply of the MARKFED was that the rice which was supplied was not in accordance with the terms of the contract and that the same was sub-standard on account of which the same was rejected by the foreign buyer. ( 3 ) ACCORDING to the petitioners, the rice supplied was in accordance with the specifications and was not sub-standard and that they are entitled to the balance of the price. ( 4 ) THE petitioner entertained an apprehension that instead of paying the balance price, MARKFED would resort to encashment of bank guarantee. They, therefore, brought I. A. 4316/81 in Suit No. 1392-A of 1981 for issue of ex parte temporary injunction, restraining the MARKFED from encashment of the aforesaid bank guirantee. That application was decided by H. L. Anand, J. along with such other applications in other matters. The judgment of H. L. Anand, J. is M/s. Banwuri Lal Radhe Mohan v. Punjab State Co-operative Supply and Marketing federation Ltd, reported as AIR. 1982 Delhi 357. It is laid down by H. L. Anand,j. that it is well settled that the performance guarantee, even though having their genesis in the primary contract between the parties, are nevertheless autonomous and independent contracts, that a bank which gives performance guarantee must honour that guarantee according to its terms and that it is not concerned in the least with the relations between the supplier and customer, nor with the question whether the supplier has performed his contracted obligations or not and that the only exception is when there is a clear fraud of which the bank has notice. In respect of the guarantee involved in this case it was held that it was absolute and that the same could be got encashed by way of making a demand in accordance with its terms. . by the MARKFED. In respect of this guarantee the following observations were made in para 7 which reads as under : "7. In the case of I. A. 4316/81, on the ex parte interim injunction being granted by this Court, the respondents have not as yet taken recourse to the guarantee bond. The question whether the demand in this case is in conformity with the bond or not does not therefore, arise. Such a question would arise only after the respondents take recourse to the bond and call upon the bank to pay. The question whether the demand in this case is in conformity with the bond or not does not therefore, arise. Such a question would arise only after the respondents take recourse to the bond and call upon the bank to pay. The interim order is liable to be vacated so as to entitle the respondent to take recourse to the guarantee in accordance with its terms. The further interim relief by way of mandatory order for the payment of the balance amount was not pressed for obvious reasons. " ( 5 ) THE application of the petitioners for issue of injunction was dismissed. The petitioners brought an application for review, which was also dismissed. Thereafter they brought 0. M. P. No. 62 of 1982 and I A 1719 of 1982. ( 6 ) THE contention of the petitioners is that MARKFED had committed a fraud inasmuch as in proceedings under Section 20 of the Arbitration Act brought against it by STC, it had taken a pica that the contract of supply of rice stood performed while intentionally in the present litigation, with a view to have unjust enrichment by way of encashment of guarantee it is misrepresenting that perfomance of the contract did not take place as substandard rice was supplied by the petitioners. ( 7 ) A preliminary objection was raised by learned counsel for MARK- FED. He stated that the present applications were barred by the judgment aforementioned of H. L. Anand, J. It was explained that although the question of fraud did not figure in the original application for issue of temporary injunction, yet the same was brought before the court by way of review petition which was dismissed thereby meaning that the plea of fraud had no substance. ( 8 ) I have already reproduced para 7 of the judgment of H. L. Anand, J. It is clear from the same that it was held that the previous application for issue of injunction of the petitioners was not maintainable because no demand for encashment of guarantee was made by that time by MARKFED. That clearly means that dismissal of the aforesaid application proceeded on the ground of the same being premature. It is true that the petitioners did bring a review petition in which they mentioned about the existence of fraud. That clearly means that dismissal of the aforesaid application proceeded on the ground of the same being premature. It is true that the petitioners did bring a review petition in which they mentioned about the existence of fraud. That petition was dismissed in limine and no adjudication was made in respect of perpetration of fraud or otherwise, obviously because till then the ground of the application being premature existed as no demand ofencashment of bank guarantee was made by MARKFED. Therefore, the present applications are not barred by the judgment of H. L. Anand,j. and I proceed to determine them on merits. ( 9 ) THE proposition of law in respect of encashment of bank guarantee is well settled. There are two types of performance guarantees. The first are the ones which are absolute and they are encashable on the very demand of the beneficiary and the demand according to the terms of the guarantee is conclusive. In such types of guarantees the beneficiary is the sole judgment or abiter as to whether there is any breach of underlying or primary contract on the part of the other party and as to how much amount is due to the former. The other type is where guarantee is not encashable without proof of breach of underlying contract. However, in both types of guarantees bank issuing performance guarantee is not concerned with the underlying contract. The duties of a bank in such guarantee are created by the document itself which in other words is independent and autonomous and is not concerned with the underlying contract unless the guarantee itself says that it will be enforceable on the proof of breach of the primary underlying contract. There is, however, only one exception which is stated in the following words in United Commercial Bunk v. Bank of India and others, AIR 1981 Supreme Court 1426: "except possibly in clear cases of fraud of which the banks have notice, the courts will leave the merchants to settle their disputes under the contracts by litigating or arbitration as available to them or stipulated in the contracts. " (page 1438 para 41 ). ( 10 ) IT is on the exception that the petitioners rely in this case and there is no dispute that the guarantee in this case was absolute in terms as held by H. L. Anand,j. (AIR 1982 Delhi 357 ). " (page 1438 para 41 ). ( 10 ) IT is on the exception that the petitioners rely in this case and there is no dispute that the guarantee in this case was absolute in terms as held by H. L. Anand,j. (AIR 1982 Delhi 357 ). The guarantee can be encashable on a mere demand cauched in the language in terms of the guarantee As already mentioned, the case of the petitioners is that MARKFED is pleading performance of the contract as against STC with a view to save itself from the encashment of guarantee furnished by it to STG while as against the petitioners, the same MARKFED is misrepresenting that there was no performance of the contract for the supply of the same very rice with a view to have unjust enrichment by way of wrongful encashment of the guarantee furnished by petitioners. The counsel for MARKFED contended That firstly there was no question of any fraud or attempt to fraud because actually it was the petitioners who are guilty of fraud and misconduct inasmuch as inspite of the fact that sub-standard rice was supplied, they misrepresented to MARKFED that rice was in accordance with the specifications and obtained a huge amount of Rs. 49,18,286. 74 P. It is also contended by the counsel for MARKFED (Shri Kapil Sibel) that fraud which is contemplated by exception is the one which relates to the contract of guarantee itself for instance in its obtaining, in respect of documents relating thereto and that the said fraud does not relate to underlying or primary contract while in the present case fraud pleaded by the petitioners relates to the performance of the underlying contract. ( 11 ) THEREFORE, the first question is as to what type of fraud is contemplated (as exception to the general rule regarding the contracts of guarantee) in the aforesaid Supreme Court authority as well as other authorities (M/s. Banwari Lal Badhey Mohan v. Punjab State Co-operative Supply and Marketing Federation Ltd. , AIR 1982 Delhi 357 and National Oil and Chemical Industries, Delhi v. Punjab and Sind Bank Ltd. Delhi and another, AIR 1979 Delhi 9 ). ( 12 ) AS already mentioned the contract of guarantee is independent of the underlying contract and is autonomous. ( 12 ) AS already mentioned the contract of guarantee is independent of the underlying contract and is autonomous. The necessary corollary of such independence and autonomy is that one is not to go beyond that contract and has not to look to any othier contract including the underlying or primary one. As already stated performance of underlying contract comes into picture only if guarantee itself makes its encashment subject to proof of performance of former contract. If scrutiny is commenced in respect of the performance of the underlying contract, obviously the autonomy and independence of the contract of an absolute guarantee will be lost and the enforcement of the same will acquire defendence upon the result of the enquiry relating to the former (underlying) contract. Hence, the fraud which is contemplated by the exception is one which has direct connection with the contract of guarantee in respect of its coming into existence, continuance etc. ( 13 ) EVEN otherwise there is no prima facie case of fraud. The conduct of MARKFED has been fair. It paid such a huge amount of Rs. 49,18,286. 74 to the petitioner. That clearly indicated that MARKFED genuinely and bona fide entertained a belief that the petitioner had performed the contract. Learned counsel for MARKFED contended that in fact it was the petitioners who committed fraud by way of supplying sub-standard rice thereby exposed MARKFED to the risk of paying damage to STC. He also contended that it was for committing fraud and by underband means that the petitioners obtained a report of M/s. S. G. S. (India) Pvt. Ltd. for the purposes of showing that the quality of the rice was according to the specifications contained in the contract and thereby misled and cheated MARKFED to part with huge amount of more than Rs. 49,00,000. 00 and the aforesaid allegations of MARKFED require determination in appropriate legal proceedings which, as it appears, will be arbitration proceedings. So, it cannot be said even on the face of it that MARKFED should be tied down with its admission about the performance of the contract of supply of rice and it should be held that its move to get an encashment of guarantee is based on misrepresentation, that there was no non-performance of the contract and its object is to have wrongful gain or what Dr. L. M. Singhvi, counsel for the petitioner, described as unjust enrichment ( 14 ) COUNSEL for the petitioners contended that according to the contract between MARKFED and the petitioners, the only obligation of the petitioners was to get the rice inspected by M/s S. G. S. (India) Pvt. Ltd. and deliver the same at the rail-head at Delhi, that they got inspected rice from M/s. S. G. S. (India) Pvt. Ltd. who had approved the quality, that the rice was duly delivered at the railhead at Delhi and thus the contract of the petitioners stood performed and that hence there was no question of any breach on their part so as to justify the forfeiture of the security by way of encashment of guarantee. The learned counsel also relied upon Section 7 of the Export (Quality Control and Inspection) Act, 1963 (hereinafter REFERRED TO as the Export Act ). Section 7 inter alia says that the Central Government may by notification in the Official Gazette establish or recognise ]agencies for the quality control or inspection or both and that the opinion of recognised agency shall be final subject to filing of an appeal against opinion. Learned counsel further points out that by way of notification dated September, 30, 1980 published in the Gazette of India Extraordinary dated 24th February, 1982, M/s. S. G. S. (India) Pvt. Ltd. was recognised as one of the agencies for the aforesaid inspection under Section 7 of the Export Act, that in the present case the said agency inspected the rice and that, therefore, the opinion of that agency in favour of the petitioners had statutory finality. ( 15 ) BUT the aforesaid matters relate to the performance of the underlying contract and will have to be considered in appropriate legal proceedings. They cannot be taken into consideration in respect of the matter of encashment of bank guarantee because the contract of guarantee is to be dealt with independently of the underlying contract. It may, however, mentioned that the learned counsel for the MARKFED stated at the Bar that it was by way of underhand means that the certificate of M/s. S. G. S. (India) Pvt. Ltd. was procured by the petitioners, that consequently inspection was got done from other agencies recognised under the Export Act and that they gave an opinion that the rice supplied by the petitioners was sub-standard. That contention of MARKFED will have to be taken into consideration in the appropriate proceedings. ( 16 ) FOR the foregoing reasons the petitioners are not entitled to any injunction and thus their application (1. A. 1719/82) is liable to be dismissed. They are not also entitled to the relief prayed for in 0. M. P. No. 62 of 1982. In case that relief to the effect that MARKFED should not withhold payment of Rs. 24,39,431. 96 P. to the petitioners is granted, it will obviously mean that MARKFED would be directed to pay the said amount to the petitioners without affording the former any opportunity of being heard and present its case. It will only be during the appropriate legal proceedings (which in the present case most probably would be arbitration proceedings) that it would be found if the petitioners are entitled to recover any amount, at all, from MARKFED and if so, how much. ( 17 ) WHATEVER has been stated above is merely tentative without prejudice to the ultimate decision of the disputes between the parlies inappropriate legal proceedings. ( 18 ) UNDER the above circumstances I dismiss both I. A. 1719 of 1982 and 0. M. P. No. 62 of 1982 and vacate the injunction order already issued. However, I leave the parties to bear their own costs.