S. S. CHADHA, J. ( 1 ) THIS appeal under S. 10 of the Delhi High Court Act, 1966 is directed against the order dt. Feb. 4, 1987 passed by Hon ble Mr. Justice G. C. Jain, a learned single Judge of this Court dismissing an application of the appellant under S. 41 read with Schedule II of the Arbitration Act, 1940 for the grant of interim relief restraining the National Project Construction Corporation Ltd. from enforcing the bank guarantee dt. July 25, 1985 furnished by the United Commercial Bank at its branch at Calcutta. ( 2 ) M/s. National Hydro Electric Power Corporation Ltd. (for short called the NHPC) floated tenders in respect of the construction of one of the component units of the project known as the "power House Block". The National Projects Construction Corporation Ltd. , the respondent, was awarded the work. The appellant was awarded subsequently as a sub-contractor the work of Construction of Protection Block and Stage-11 Power House and ancillary work Salal Project at an estimated cost of Rs. 3,25,28,330. 00. An additional work was entrusted to the appellant on July 12, 1984 at an estimated value of Rs. 1,87,94,132. 00. A formal contract was executed between the parties. One of the terms of the contract was that a mobilisation advance to the extent of 8% of the total value of the contract would be paid to the appellant on furnishing a bank guarantee. ( 3 ) THE appellant in his petition under S. 41 read with Schedule II of the Arbitration Act for the grant of interim relief states that. although a sum of Rs. 41,09,796. 96 became payable as mobilisation advance, the respondent paid only a sum of Rs. 26,06,2667- and that the appellant had furnished two bank guarantees; one in the sum of Rs. 26,06,266. 00 and the other for Rs. 15,03,570. 00. A copy of the bank guarantee is filed. The bank guarantee was effective for a period of one year with effect from July 20, 1985 in the first instance and it was later on renewed from time to time and finally up to July 29, 1987. ( 4 ) CERTAIN disputes arose between the parties in the execution of the sub-contract and were referred to the sole arbitration of Shri B. N. Waghrey of Hyderabad in accordance with the arbitration agreement between the parties. ( 4 ) CERTAIN disputes arose between the parties in the execution of the sub-contract and were referred to the sole arbitration of Shri B. N. Waghrey of Hyderabad in accordance with the arbitration agreement between the parties. The appellant filed a statement of facts and claims before the arbitrator claiming a total sum of Rs. 2,35,07,259. 08. The respondent filed a counter-claim of Rs. 1,40,98,562. 52. This includes the mobilisation advance of Rs. 26,06,266. 00 with interest calculated up to Dec. 31,1986, in all Rs. 35,69,095. 27. ( 5 ) DURING the pendency of the dispute before the arbitrator, the respondent invoked the bank guarantee furnished by United Commercial Bank, Calcutta. Along with the said petition under S. 41, the appellant filed a copy of the letter dt. Jan 14, 1987 addressed to the United Commercial Bank, Calcutta from the counsel for the respondent calling upon the bank to pay the amount of the guarantee. The appellant invoked the jurisdiction of this Court for the grant of a temporary injunction restraining the respondent from enforcing the bank guarantee dt. July 20, 1985. The learned single Judge dismissed the petition in limine by the order under appeal. ( 6 ) AT the time of the admission of the appeal, we were taken through the letter dt. Jan 14, 1987 addressed to the United Commercial Bank, Calcutta. The contention was that the demand made by the respondent was not in terms of the bank guarantee and thus not enforceable. The copy of the demand dt. Nov. 19, 1986 was neither before the learned single Judge nor on the record of the appeal and we called upon the respondent to place on record a copy of the demand dt. Nov. 19, 1986 made by the respondent on the United Commercial Bank. That letter has been placed on the record along with the additional affidavit. ( 7 ) IT is apposite to reproduce a part of the bank guarantee containing the following terms: ". . . . . . . . WE the United Commercial Bank, 10, Brabourne Road, Calcutta-700001 (hereinafter referred to as "said bank") having our Registered Office at 10, Brabourne Road, Calcutta, 700001 do hereby guarantee the due recovery by the Corporation of the said advance along with interest thereon as provided according to the terms and conditions of the Contract. . . . . . . . WE the United Commercial Bank, 10, Brabourne Road, Calcutta-700001 (hereinafter referred to as "said bank") having our Registered Office at 10, Brabourne Road, Calcutta, 700001 do hereby guarantee the due recovery by the Corporation of the said advance along with interest thereon as provided according to the terms and conditions of the Contract. If the said Contractor fails to utilise the said advance for the purpose of the contract and/or the said advance together with interest thereon as aforesaid is not fully recovered by the Corporation, we the United Commercial Bank hereby unconditionally and irrevocably undertake to pay to the Corporation on demand and without demur to the extent of the said sum of Rs. 26,06,266. 00 plus interest @ 19. 5% p. a. and any claim made by the Corporation on us for the loss or damage caused to or suffered by the corporation by reason of the Corporation not being able to recover in full the said sum of Rs. 26,06,266. 00 plus interest as aforesaid. 2. We, the United Commercial Bank further agree that the Corporation shall be the sole judge of and as to whether the said Con tractor has not utilised the said advance or any part thereof for the purpose of the- contract and the extent of loss or damage. caused to or suffered by the Corporation on account of the said advance together withinterest not being recovered in full and the decision of the Corporation that the said contractor has not utilised the said advance or any part thereof, for the purpose of the contract and as to the amounts of loss caused to or suffered by the Corporation shall be final and binding onus. "the demand made by the respondent on the United Commercial Bank Involving the bank guarantee is contained in the letter dt. Nov. 19,1986. In that letter, the respondent makes a demand in the sum of Rs. 26,06,2667- plus interest at the rate of 19. 5% per annum calculated up to Oct. 31, 1986 amounting to Rs. 9,07,898. 00, totalling Rs. 35,14,164. 00against the bank guarantee No. 193/85 dt. July 25, 1985 issued by the United Commercial Bank in favour of the respondent at the request of M/s, G. S. Atwal and Co. (Engineers) Pvt. Ltd. , appellant-herein. 5% per annum calculated up to Oct. 31, 1986 amounting to Rs. 9,07,898. 00, totalling Rs. 35,14,164. 00against the bank guarantee No. 193/85 dt. July 25, 1985 issued by the United Commercial Bank in favour of the respondent at the request of M/s, G. S. Atwal and Co. (Engineers) Pvt. Ltd. , appellant-herein. The letter further states: "we hereby certify that the said contractor has neither completed the work in respect of which the mobilisation advance was given to him nor has paid back the sum of Rs. 26,06,266. 00 with interest to date. This is resulting loss to us. " ( 8 ) THE notice dt. January 14,1987 by the counsel for the respondent makes a demand against mobilisation advance stated to be outstanding as on Dec. 31, 1986 for the sum of Rs. 25,79,592. 68. After adding the interest as mentioned in the notice, a total demand of Rs. 36,29,261. 23 is made. It is then stated that:- "i have instructions to convey to you my client s decision that M/s. G. S. Atwal and Co. Engineers) Pvt. Ltd. , the contractor has neither completed the work in respect of which the mobilisation advance was given nor has paid back the balance principal amount of Rs. 25,79,592. 68 plus interest in remitting in loss and damage to my clients. " ( 9 ) THE main submission of Mr. Daljit Singh, the learned counsel for the appellant is that the obligation of the bank under the bank guarantee arises only if the appellant had failed to utilise the mobilisation advance for the purpose of the contract. He urges that the appellant had executed the total works of the value ofrs. 2,92,31,382. 00 even according to the admission of the respondent contained in the pleadings before the arbitrator and only a sum of Rs. 71,62,424. 00 had been paid to the appellant after adjusting certain amounts of recovery. Our attention is invited to Cl. 11. 1 of the contract between the parties to urge that under the terms of the contract the mobilisation advance was to be recovered from the running bills of the appellant. It is contended that the entire amount of mobilisation advance of Rs. 26,06,266. 00 together with interest that had accrued due, had been recovered by the respondent from the running bills of the appellant. It is contended that the entire amount of mobilisation advance of Rs. 26,06,266. 00 together with interest that had accrued due, had been recovered by the respondent from the running bills of the appellant. The submission is that the invoking of the bank guarantee by the respondent is a fraudulent act of recovering the mobilisation advance twice over. Reliance is placed on "arul Murugan Traders v. Rashtriya Chemicals and Fertilisers Ltd. , Bombay", AIR 1986 Mad 161 that there can be exceptional circumstances against allowing a party to enforce the bank guarantee "that is where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of facts which to his knowledge are untrue. The exception for fraud, on the part of the beneficiary seeking to avail himself of the credit, is a clear obligation of the maxim Ex turpi causa non oritur actio or, if plain English is to be preferred "fraud unravels all". The courts will not allow their process to be used, by a dishonest person to carry out a fraud. Reliance is also placed on "banerjee and Banerjee v. Hindustan Steel Works Construction Ltd. ", AIR 1986 Cal 374 wherein it was held that if a guarantee is enforced by fraud, misrepresentation, deliberate suppression of material facts, or the like, that willgive rise to a special equity in favour of the contractor who will then have a right to stop its enforcement by obtaining an order from the Court. ( 10 ) THE law relating to the enforcement of the bank guarantee is well settled now. One of us (S. S. Chadha, J.) had an occasion to consider the question in "rawala Construction Co. v. Union of India", AIR 1977 Delhi 205 wherein it was observed : "the bank guarantee,. therefore, constitutes an agreement between the bank and the Government under which there is an absolute obligation of the bank to make the payment to the Government merely on a demand from the Government. The bank is prohibited under the guarantee from raising any objection. Any demand made on the bank in accordance with the eventualities mentioned in Cl. 2 is conclusive as regards the amount due and payable by the bank. The bank is prohibited under the guarantee from raising any objection. Any demand made on the bank in accordance with the eventualities mentioned in Cl. 2 is conclusive as regards the amount due and payable by the bank. There may be disputes between the petitioner and the Government about the amount claimed by way of loss or damage caused to or would be caused to or suffered by the Government by reason of any breach by the petitioner of any of the terms and conditions contained in the contract agreement or by reason of the petitioner s failure to perform the said contract agreement but so far as the bank is concerned, it has to make payment on demand without any demur. The bank guarantee is a definite undertaking on the part of the bank and constitutes an engagement of the bank to pay to the Government merely on demand. The bank has assumed the liability and responsibility to satisfy directly the claim of the Government. Thus an independent contract has been created between the bank and the Government by reason of the bank undertaking to the Government in consideration of the Government having agreed not to retain Rs. 4 lacs out of the reserve or the retention money as provided under the said contract agreement, to pay up to Rs. 4 lacs without any demur merely on demand from the Government. Such bank- guarantees have assumed great significance in the present commercial system and in contracts between the Government and the contractors. An elaborate system has been built on the footing that the banks would always honour without any objection the obligation under the guarantee and on that assurance the reserve or retention money is not retained by the Government. Such contracts have to be respected and not interfered with. " ( 11 ) THE Supreme Court in "united Commercial Bank v. Bank of India", AIR 1981 SC 1426 has laid down the rule that the bank issuing or confirming a letter of credit or a bank guarantee is not concerned with the underlying contract between the buyer and seller. The bank guarantee constitutes an independent contract between the banker and the party in whose favourthe bank guarantee is issued at the instance of the contractor. It imposes an absolute obligation to pay. The bank guarantee constitutes an independent contract between the banker and the party in whose favourthe bank guarantee is issued at the instance of the contractor. It imposes an absolute obligation to pay. ( 12 ) THE terms of the bank guarantee in this case imposes an absolute obligation on the banker to pay the amount of the guarantee in accordance with terms. We have reproduced the two clauses of the bank guarantee to show that the obligation of the banker is absolute. The bank is not concerned with any dispute between the appellant at whose instance the bank guarantee is issued and the respondent. There are two conditions mentioned in the terms of the bank guarantee, namely, (1) if the contractor fails to utilise the said advance for the purpose of the contract and/or (2) the said advance together with interest thereon as aforesaid is not fully recovered by the respondent. Cl. 3 of the bank guarantee further provides that the decision of the respondent that the said contractor has not utilised the said advance or any part thereof for the purpose of the contract and as to the amount of loss/damages caused to or suffered by the respondent, shall be final and binding on the bank. It is true that neither the demand letter dt. Nov. 19, 1986 nor the notice of the counsel for the respondent dt. Jan. 14, 1987 stated that the contractor has failed to utilise the mobilisation advance for the purpose of the contract. The demand is permissible under either of the terms. Both these letters, particularly the demand letter dt. Nov 19, 1986 in specific terms stated that the appellants have neither completed the work in respect of mobilisation advance so given to them nor have paid back the sum of Rs. 26,06,266. 00 with interest to date and this is resulting in loss to the respondent. In our view, the conditions that the mobilisation advance had not been recovered by the respondent contained in the bank guarantee is clearly fulfilled in the demand letter dt. Nov. 19,1986. This demand letter is in the exact compliance of the terms of the bank guarantee. ( 13 ) THAT takes us to the consideration of the question whether there is any convincing material on the record that the entire mobilisation advance with interest accrued due had been adjusted or recovered by the respondent. Nov. 19,1986. This demand letter is in the exact compliance of the terms of the bank guarantee. ( 13 ) THAT takes us to the consideration of the question whether there is any convincing material on the record that the entire mobilisation advance with interest accrued due had been adjusted or recovered by the respondent. There is a difference in the quantification of the mobilisation advance in the demand letter dt. Nov. 19, 1986 and the demand through the advocate of the respondent in the notice dt. Jan. 14, 1987 and it did cause some confusion. During the hearing of the appeal, we gave an opportunity to the parties to explain this discrepancy. The respondent has filed an affidavit on record that a sum of Rs. 26,407. 00 was recovered against the mobilisation advance in the advance bill prepared by the respondent for the period April, 1986 to May 1986 and this advance bill was accepted and signed on behalf of the appellant. The appellant has not been able to produce on record any prima facie evidence of the deduction of any further amount or adjustment towards the mobilisation advance against the running bills. An affidavit has been filed in Court today together with a statement in tabulated form showing the gross value of the work executed, deduction on account of recoveries towards price of material, income-tax and security deposit, the net amount payable under the running bills, the amount actually paid by the respondent on ad hoc basis and the net amount still outstanding against the respondent. The counsel urges that the amount withheld against each bill is more than 8% of the gross value and, therefore it must be inferred that the mobilisation advance was duly recovered. We are unable to accept this affidavit. ( 14 ) MR. A. N. Parekh, the learned counsel for the respondent produced in Court number of running bills and in none of those bills there was a recovery of any amount towards the mobilisation advance. They were put to the counsel for the appellant yesterday and he was given an opportunity to produce in court the office copies of the bills submitted ho the respondent in which the recoveries towards the mobilisation advance had been shown. None has been produced in Court today. They were put to the counsel for the appellant yesterday and he was given an opportunity to produce in court the office copies of the bills submitted ho the respondent in which the recoveries towards the mobilisation advance had been shown. None has been produced in Court today. Even in the case of M/s. Banerjee and Banerjee ( AIR 1986 Cal 374 ) (supra) relied upon by the counsel it is held that for obtaining an order from the court, a very strong prima facie arguable case in support of the contention that there is a fraud or special equity must be made out and the Courts will not interfere with the enforcement of unconditional or conditional bank guarantees or letters of credit on the mere allegation of fraud or special equity. There is a mere allegation without any prima facie proof that the entire amount of mobilisation advance has been recovered by the respondent and the respondent by his fraudulent act is recovering the amounts twice over. ( 15 ) WE have not made reference to the arguments addressed at the Bar about the extent of the dispute between the parties or the claims or the counter claims made as these matters are extraneous in consideration of the question of the enforcement or otherwise of the bank guarantee. A contract of bank guarantee is an independent contract between the banker and the respondent and has to be worked out independently of the disputes arising out of the work agreement between the parties to this petition. ( 16 ) WE have taken a prima facie view on the question about the recovery/adjustment of the mobilisation amount. Of course, the arbitrator will go into the merits of the question about the recovery or otherwise of the mobilisation advance and any opinion expressed by us will not prejudice either of the parties before the arbitrator. ( 17 ) FOR the above reasons, the appeal fails and is dismissed with costs. The interim injunction is hereby vacated.