ORDER : 1. Revision petitioner is the first defendant in O.S. 105 of 1992 of the Second Additional Sub Court, Ernakulam and the first respondent in I.A. 882 of 1992 in the said under suit, a petition under Order 39 Rule 1 C.P.C. for an injunction restraining the revision petitioner from invoking Ext. B1 bank guarantee issued by the second respondent and the second respondent making any payment thereunder. Trial court allowed the petition and granted an interim injunction for six months restraining the revision petitioner from invoking the bank guarantee provided the first respondent/plaintiff renews the said bank guarantee for another period of six months with all the terms and conditions of the earlier bank guarantee within one week. The order also enjoined, after the expiry of the six months, the parties can apply for modification of the order or for any other relief. The revision petitioner and the first respondent filed appeals. Revision petitioner preferred C.M.A. No. 48 of 1992 and first respondent preferred C.M.A. No. 49 of 1992. The lower appellate court by a common judgment dismissed C.M.A. 48 of 1992 and allowed C.M.A. No. 49 of 1992 where by the lower appellate court granted temporary injunction as prayed for by the first respondent. This revision is directed against the aforesaid judgment of the lower appellate court. The revision petitioner is a public sector undertaking engaged in design, construction and commissioning of Nuclear Power Plants in this country and is a Corporation owned by the Government of India. First respondent instituted the aforesaid suit for a declaration that the revision petitioner has no right or authority to invoke Ext. B1 bank guarantee dated 5-2-1991 issued by the second respondent-bank that the second respondent has no right to make any payment pursuant to the same and that the bank guarantee stands discharged. 2. In 1990 the revision petitioner invited tenders for taking on contract the work of “construction of infrastructural buildings and structures” at the Kundangulam Nuclear Power Project that was being set up by the revision petitioner. The first respondent being the successful tenderer, he was awarded the contract by an acceptance letter (work order) Ext. A7. As per the same the work was to be completed within a period, of 15 mouths from the date of Ext. A7. The total cost of the work was estimated to be Rs. 4,44,32,662.25. The first respondent being the successful tenderer, he was awarded the contract by an acceptance letter (work order) Ext. A7. As per the same the work was to be completed within a period, of 15 mouths from the date of Ext. A7. The total cost of the work was estimated to be Rs. 4,44,32,662.25. As per the terms of the work order, the first respondent was entitled to get 10% of the contract amount as mobilisation advance intended to meet the initial expenditure for starting the work, and the said mobilisation advance has to be recovered from the first respondent in a phased manner with interest thereon at 15% per annum before the completion of the work. The recovery had to be made on a pro rata basis from the running bills of the first respondent so that the money would be recovered when 85% of the work was complete. It was further enjoined, the mobilisation advance has to be secured by a bank guarantee to be furnished, by the first respondent for the amount so advanced plus interest thereon. The bank guarantee was to be furnished in the form acceptable to the revision petitioner and has to be kept valid till the entire amount including the interest was fully recovered. 3. In accordance with the same, the first respondent furnished Ext. B1 bank guarantee issued by the second respondent and got the mobilisation advance from the revision petitioner on 21-2-1991. The first respondent took up the contract work and started the construction work. According to the revision petitioner due to the slow rate of progress of the work on a review of the progress the revision petitioner and the first respondent mutually agreed to terminate the contract and the contract was terminated on 20-12-1991. The minutes regarding the same is Ext. A1 same as Ext. A13. It provided that the revision petitioner and the first respondent will jointly determine the recoveries to be made by the revision petitioner and compensation for losses to be paid to the first respondent consequent to the termination of the Contract. As according to the revision petitioner, in the said circumstance, there will be no more running bills so as to effect pro rate recovery of the mobilisation amount advanced and since there was no payment by the first respondent, the revision petitioner invoked Ext. B1 bank guarantee by Ext. As according to the revision petitioner, in the said circumstance, there will be no more running bills so as to effect pro rate recovery of the mobilisation amount advanced and since there was no payment by the first respondent, the revision petitioner invoked Ext. B1 bank guarantee by Ext. B6 dated 4-2-1992 and demanded payment of Rs. 40 lakhs being the total balance outstanding with interest. But the second respondent did not pay the amount immediately. In the meanwhile, the first respondent instituted the suit and got the interim injunction as afore-indicated. 4. It was contended by the learned counsel for the revision petitioner that the orders of the courts below suffer from vital infirmity in as much as they failed to give effect to clause 2 of Ext. B1 bank guarantee. According to the learned counsel, in as much as the petitioner invoked the bank guarantee as per clause 2 of Ext. B1, an investigation as to whether there was default on the part of the first respondent was beyond the scope of the enquiry. It was also maintained by the learned counsel that the termination of the contract by mutual agreement was occasioned on account of the slow progress made by the first respondent. With due regard to the nature and character of a bank guarantee, it was irrelevant, in the circumstance, for the court to have considered the reason for the termination of the underlying contract to decide whether the bank guarantee was enforceable. According to the learned counsel, the view of the lower court that there was fraud and irretrievable injustice in invoking the contract has no basis. He maintained that totally irrelevant matters weighed with the courts below the arrive at the conclusion it reached. According to the learned counsel in as much as the contract of guarantee is an independent and autonomous contract the right and liability of the parties thereto ought to have been decided with due regard to the terms and conditions in that contract. The decision should not have been influenced by the circumstances which led to the termination of the underlying contract. 5. On the other hand, the learned counsel for the first respondent contended - that Ext. B1 bank guarantee is not absolute in itself as the conditions therein would show that the enforceability of the said bank guarantee wholly depended upon the default committed by the first respondent. 5. On the other hand, the learned counsel for the first respondent contended - that Ext. B1 bank guarantee is not absolute in itself as the conditions therein would show that the enforceability of the said bank guarantee wholly depended upon the default committed by the first respondent. Therefore, when the bank-guarantee is sought to be enforced, it is necessary in the circumstance to see whether there was default on the part of the first respondent. According to the learned counsel the whole contract came to a stand still because of paucity of fund to meet the erection of the plant. According to the learned counsel the whole project was envisaged on the basis of economic and technical aid from the erstwhile U.S.S.R. When the U.S.S.R. became no longer, in existence, the source of the said aid dried up and thus the revision petitioner was not in a position to proceed with the project and that was the reason that led to the termination of the contract. It was contended by the learned counsel that as per Ext. A13 while both parties were engaged in the assessment of compensation payable to the first respondent, it was sheer fraud that the revision petitioner invoked the bank guarantee. Therefore, invoking of bank guarantee thus not only is vitiated by fraud but if it is enforced that would result in irretrievable injustice to the first respondent. In short, according to the learned counsel, there was no default on the part of the first respondent, and the very invoking of the bank guarantee is vitiated by fraud. Therefore, according to the learned counsel the judgment of the lower appellate court does not suffer from any infirmity. 6. With due regard to the aforesaid points urged by the learned counsel, it is necessary to understand the terms of the Bank guarantee, Ext. B1. In the said context it is also necessary to examine whether the bank guarantee is an independent and autonomous contract as is maintained by the revision petitioner. Ext. 6. With due regard to the aforesaid points urged by the learned counsel, it is necessary to understand the terms of the Bank guarantee, Ext. B1. In the said context it is also necessary to examine whether the bank guarantee is an independent and autonomous contract as is maintained by the revision petitioner. Ext. A7 work order states that the first respondent will be paid an advance of 10% of the value of the work to meet the initial expenditure on mobilisation at simple interest at the rate of 15% that mobilisation advance would be paid against bank guarantee for an equal amount plus interest, that the guarantee should be furnished in the form acceptable to the Corporation and that the bank guarantee shall be kept valid till the entire amount is recovered. As regards the recovery the provision in Ext. A7 is: “The mobilisation advance with interest shall be recovered from your running account bill on pro rata basis. The entire advance with interest shall be recovered in full when the value of work billed reaches 85% (Eighty five percent) of the contract value”. 7. It was as per the said provision in Ext. A7, Ext. B1 bank guarantee was issued. Ext. B1 is dated 5-2-1991. Therein the second respondent undertakes to indemnify the petitioner to a sum of Rs. 44,43,262/- plus interest at 15% per annum against all losses and damages that maybe caused by the revision petitioner in relation to the advance payment to be made by the petitioner to the first respondent by reason of any default or defaults on the part of the contractor in the due execution of the said contract or carrying cut any work under the said contract in respect of which such advance payment was made. It further provides that in the event of any default or defaults on the part of the contractor as aforesaid the second respondent shall forthwith. On demand pay to the petitioner any sum or sums not exceeding Rs. 44,43,262/- plus interest at 15% per annum. Clause 2 of Ext. B1 in the circumstance is of vital importance. The same reads: “2. On demand pay to the petitioner any sum or sums not exceeding Rs. 44,43,262/- plus interest at 15% per annum. Clause 2 of Ext. B1 in the circumstance is of vital importance. The same reads: “2. Notwithstanding anything to the contrary your decision as to whether the contractor has made any such default or defaults and the amount or amounts to which you are entitled by reason thereof will be binding on us and we shall not be entitled to ask you to establish your claim or claims under this guarantee but will pay the same forthwith without any objection.” 8. As noticed, according to the revision petitioner, the bank guarantee is an independent and autonomous contract and the rights and liabilities thereunder have to be judged with due regard to the terms in the bank guarantee. This question has pivotal importance in deciding the question of default by the debtor. This is particularly so, as according to the learned counsel for the first respondent Ext. B1 is not an unconditional bank guarantee in as much as the enforcibility of the same rests on default or defaults committed by the first respondent. According to him, in deciding the said, question reason that occasioned the termination of the underlying contract is also a relevant factor. The learned counsel, therefore, maintained that if as per Ext. A13 itself, it is seen that the first respondent is not guilty of any default, the revision petitioner will not be entitled to enforce the bank guarantee. In resolving the said dispute as regards the enforceability of the bank guarantee, it is necessary to understand whether the bank guarantee is an independent autonomous contract and nothing more than the clauses thereunder need be considered in the matter of enforceability of the bank guarantee. 9. In the decision in U.P.C.F. Ltd. v. Singh Consultants and Engineers (P.) Ltd. ( (1988) 1 SCC 174 ) the Supreme Court referring the decision in United Commercial Bank v. Bank of India ( (1981) 2 SCC 766 ) quoted the following observation: “……………………..the rule is well established that a bank issuing or confirming a letter of credit is not concerned with the underlying contract between the buyer and seller. Duties of a bank under a letter of credit are created by the document itself, but in any case it has the power and is subject to the limitations which are given or imposed by it, in the absence of the appropriate provisions in the letter of credit”. 10. A bank guarantee under law is having the same effect and quality a letter of credit. The Supreme Court in the same decision held that as to the general principle stated above, there is one established exception, 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, representations of fact that to his knowledge are untrue. It is also held: “On the basis of these principles I reiterate that commitments of banks must be honoured free from interference by the courts. Otherwise, trust in commerce internal and international would be irreparably damaged. It is only in exceptional cases that is to say in case of fraud or in case of irretrievable injustice be done, the court should interfere.” 11. In the decision in Tarapore & Co., Madras v. Tractoroexport, Moscow ( (1969) 1 SCC 233 : AIR 1970 SC 891 ) the Supreme Court quotes with approval the statement of Jenkins, L.J., in Hamzeh Walas and Sons v. British Imex Industries Ltd. ( 1958 (2) QB 127 ) which is to this effect: “We have been referred to a number of authorities, and it seems to be plain enough that the opening of a confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes upon the banker an absolute obligation to pay, irrespective of any dispute there may be between the parties as to whether the goods are up to contract or not. An elaborate commercial system has been built up on the footing that bankers' confirmed credits are of that character, and, in my judgment, it would be wrong for this court in the present case to interfere with that established practice.” 12. After review of decisions on the point, the Supreme Court observed: “That decision establishes the well known principle that the letter of credit is independent of and unqualified by the contract of sale or underlying transaction. The autonomy of an irrevocable letter of credit is entitled to protection. After review of decisions on the point, the Supreme Court observed: “That decision establishes the well known principle that the letter of credit is independent of and unqualified by the contract of sale or underlying transaction. The autonomy of an irrevocable letter of credit is entitled to protection. As a rule Courts refrain from interfering with that autonomy.” 13. A Division Bench of this Court in C.M.A. No. 86 of 1993 also held: “Shortly stated, a bank guarantee cannot be interfered with except in case of fraud or in case of genuine apprehension of irretrievable injustice. This is the well settled principle of English Law. This principle is followed in India.” 14. In the decision in Syndicate Bank v. Vijay Kumar ( (1992) 2 SCC 330 : AIR 1992 SC 1066 ) also the law is reiterated and it is held: “It is well settled that the Bank guarantee is an autonomous contract and imposes an absolute obligation on the Bank to fulfil the terms and the payment in the Bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable.” 15. In the said decision it is also observed that borrower cannot be made liable for more than what he has undertaken. It is stated therein that the bank guarantee is in the nature of a special contract depending upon the happening of a specific event. 16. Learned counsel for the respondents relied on the decision of the Delhi High Court in Nangia Construction v. National Buildings Construction, 1992 (73) CC 701 ) to contend that English Law and the Indian Law as to this aspect is different. In the said decision it is observed: “The effect of these two distinctions between English and Indian law would be that whereas the English courts may be right in saying that the contract of bank guarantee is an ‘independent contract’ between two bankers owing to banking practices, by operation of statutory law, it is not permissible for the courts in India to say that the contract of bank guarantee is an ‘independent contract’ vis-a-vis a banker and a beneficiary.” 17. In view of the said Supreme Court decisions to which reference has already been made and also the decision of the Division Bench of this Court, I am unable to agree with the said statement of law in the said decision. 18. In view of the said Supreme Court decisions to which reference has already been made and also the decision of the Division Bench of this Court, I am unable to agree with the said statement of law in the said decision. 18. In this context it is necessary to note that Ext. B1 becomes enforceable on the default or defaults of the 1st respondent. In deciding whether the court can interfere, that aspect has to be considered first. The aforesaid decisions would show, bank guarantee is autonomous independent contract to which the beneficiary and bank alone are parties. The court will interfere only when there is established fraud or where irretrievable injustice will result if the court does not interfere. Interference by court is the exception. 19. Whereas learned counsel for the revision petitioner would maintain that by virtue of clause 2 in Ext. B1 bank guarantee, the bank guarantee in effect is absolute, consequently as soon as a demand is made by the beneficiary invoking clause 2 of the bank guarantee the bank must honour the demand, learned counsel for the first respondent would maintain that unless there is default in the performance of underlying contract by the first responded the revision petitioner is not entitled to invoke the bank guarantee, neither is the bank in such circumstance bound to honour the demand. In the contest before going into the question of fraud or irretrievable injustice it is necessary to consider whether the first respondent is entitled to claim that the bank guarantee would become operative only on proof of default. 20. In Clause 1 of Ext. B1 the second respondent agrees to indemnify the revision petitioner against all loss and damages that may be caused to the petitioner by reason of any default or defaults on the part of the contractor in the due execution of the said contract or carrying out any work under the contract. It is on the basis of this provision that the learned counsel for the first respondent maintained, unless there is an assertion by the petitioner as to default and evidence as regards the same Ext. B1 will not become operative. In clause 2 of Ext. It is on the basis of this provision that the learned counsel for the first respondent maintained, unless there is an assertion by the petitioner as to default and evidence as regards the same Ext. B1 will not become operative. In clause 2 of Ext. B1 as noticed, the second respondent agreed notwithstanding anything to the contrary, the decision of the revision petitioner as to whether the contractor has made any such default or defaults and the amount or amounts to which the revision petitioner is entitled to by reason of the said default the decision of the revision petitioner will be binding on the 2nd respondent. It proceeds to state that the 2nd respondent shall not be entitled ask the revision petitioner to establish his claim under the guarantee but would pay the same forthwith without any objection. By the very wording of this clause, the same has got overriding effect. With due regard to the effect of clause 2 of the guarantee it is not open either for the first respondent or the second respondent to contend that the revision petitioner should prove that the first respondent has committed default in performance of the underlying contract. 21. The decision in State of Maharashtra v. M.N. Kaul ( AIR 1967 SC 1634 ) held that the question whether a guarantee is enforceable or not depends upon the terms under which the guarantor bound himself. As noticed the terms in Ext. B1 guarantee does not admit of any ambiguity. Even when there is ambiguity, the Supreme Court in M.N. Kaul's case ( AIR 1967 SC 1634 ) observed: “In case of ambiguity when all other rules of construction fail the courts interpret the guarantee control proferentem that is, against the guarantor or use the recitals to control the meaning of the operative part where that is possible. But whatever the mode employed the cardinal rule is that the guarantor must not be made liable beyond the terms of his engagement.” 22. In view of clause 2 in Ext. B1 the bank was obliged to pay when a proper demand is made in terms of Ext. B1. 23. But the learned counsel for the respondents contended that the bank guarantee is not properly invoked and therefore the bank was not obliged to comply the demand. The bank guarantee was invoked by Ext. B6 dated 4-2-1992. B1 the bank was obliged to pay when a proper demand is made in terms of Ext. B1. 23. But the learned counsel for the respondents contended that the bank guarantee is not properly invoked and therefore the bank was not obliged to comply the demand. The bank guarantee was invoked by Ext. B6 dated 4-2-1992. In the context of the said argument by the learned counsel for the revision petitioner, it is necessary to read the relevant portion in Ext. B6: “Please refer to your Bank Guarantee No. 12/91 dated 5-2-1991 issued in favour of Nuclear Power Corporation of India Ltd. guaranteeing the payment of advance of Rs. 44,43,200/- plus interest @ 15% p.a. against the contract awarded by us to Asian Techs Ltd., Cochin. In terms of the Bank Guarantee, we hereby make a demand on you to pay us immediately an amount of Rs. 40,00,000/- (Rupees Forty lakhs only) by means of a Demand Draft drawn in favour of this Corporation payable at Bombay, since the aforesaid contract has been terminated. The amount demanded by us represents the recovery of unadjusted advance paid to the contractor and interest accrued thereon after taking into account the dues of the contractor as per terms of the contract. Please note that as per Clause 2 of the Bank Guarantee, our decision as being communicated to you, is final and binding on you.” (Emphasis supplied) 24. Ext. B6 does not state that the bank guarantee is invoked on account of the default or defaults committed by the first respondent. Therefore, according to the learned counsel, Ext. B6 cannot be held to be a valid demand to be honoured by the bank. On the other hand the learned counsel for the revision petitioner would maintain that substantial compliance would be sufficient for a valid demand. The point urged by the learned counsel for the revision petitioner is in as much as in Ext. B6 the revision petitioner states that the decision is communicated as per clause 2 of the bank guarantee, it is not necessary to state that the first respondent has committed default. Learned counsel maintained that Ext. B6 also states that the contract has already been terminated. When so much is stated in Ext. B6 the first respondent cannot claim that Ext. B6 suffers from any infirmity particularly when the second respondent has not objected to Ext. Learned counsel maintained that Ext. B6 also states that the contract has already been terminated. When so much is stated in Ext. B6 the first respondent cannot claim that Ext. B6 suffers from any infirmity particularly when the second respondent has not objected to Ext. B6; it should be noted that the 2nd respondent did not file any objection or written statement. 25. In the decision in Road Machines (India) P. Ltd. v. P. & E. Corpn. of India Ltd. (AIR 1983 Calcutta 91) adverting to the decision in Harprasad and Co. Ltd. v. Sudarsan Steel Mills (AIR 1980 Delhi 174) the Calcutta High Court held; “With great respect I am unable to accept the principles laid down by the Division Bench of the Delhi High Court in Hariprasad and Co. Ltd. (supra) to the effect that a bank guarantee should be invoked in an exect and punctilious manner setting out the entire case of the beneficiary under, the guarantee in the same way as setting out a cause of action in a plaint. A bank guarantee is a commercial document and is neither a statutory notice nor a pleading in a legal proceeding. In my view, a bank guarantee may be invoked in a commercial manner. The invocation would be sufficient and proper if the bank concerned understands that the guarantee is being invoked by the beneficiary in terms of the guarantee”. 26. This decision was relied on in the decision in D.T.H. Construction (P.) Ltd. v. Steel Authority of India Ltd. (AIR 1986 Calcutta 31) wherein the court held that if there is substantial compliance with the terms of the guarantee in the notice that will be sufficient and if there is no defect in understanding the nature and purport of such notice by the bank, the bank is bound to honour its commitment under the guarantee. 27. In C.M.A. No. 86 of 1993 a Division Bench of this Court also took the same view as held in the aforesaid Calcutta decision. Thus, it is clear that the bank guarantee being a commercial document and the same being neither a statutory notice nor a pleading in the legal proceeding, substantial Compliance by the notice invoking the bank guarantee is sufficient. Ext. B6 clearly states that as per clause 2 of the bank guarantee the decision of the revision petitioner is intimated to the second respondent. Ext. B6 clearly states that as per clause 2 of the bank guarantee the decision of the revision petitioner is intimated to the second respondent. A reference to clause 2 of Ext. B1 would clearly show that the revision petitioner invoked the bank guarantee on account of the default of the first respondent. The argument of the learned counsel that since Ext. B6 does not mention default, the same is defective is not acceptable as at any rate Ext. B6 substantially complies with the requirement of invoking the bank guarantee. It is significant in this connection to note that the bank did not state that Ext. B6 is defective. As noticed, the second respondent did not file any objection or written statement stating that they could not understand Ext. B6 as a notice invoking bank guarantee. This aspect has also relevance inconsidering the argument of the learned counsel for the first respondent that Ext. B6 is defective. In view of the above discussion, I am unable to agree with the learned counsel for the first respondent when he contended that Ext. B6 under law cannot be treated to be capable of invoking the bank guarantee. 28. Now having seen that Ext. B6 validly invoked the bank guarantee the next question for consideration is whether the court can interfere under order 39 Rule 1 C.P.C. to restrain the revision petitioner from invoking the bank guarantee or restrain the second respondent from honouring the demand and pay the amount. 29. In the decision in U.P. Co-operative Federation Ltd. v. Singh Consultants and Engineers (P.) Ltd. ( (1988) 1 SCC 174 ) the Supreme Court held: “I agree with my learned brother that in order to restrain the operation of the irrevocable letter of credit, performance bond or guarantee, there should be serious dispute to be tried and there should be a good prima facie acts of fraud.” 30. The Supreme Court then quoted with approval the statement of Sir John Donaldson, M.R. in Bolivinter Oil SA v. Chase Manhattan Bank (1984 (1) All England Report 351 and 352) which reads: “The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit. In the relatively brief time which must elapse between the granting of, such an injunction and an application by the bank to have it discharged”. 31. Then in the decision in General Electric Technical Service Co. INC v. Punjsons (P.) Ltd. ( (1991) 4 SCC 230 ) the Supreme Court held: “It is only in exceptional cases that is to say in case of fraud or in case of irretrievable injustice, the court should interfere.” 32. The Supreme Court proceeded to hold: “The nature of the fraud that the courts talk about is fraud of an ‘egregious nature as to vitiate the entire underlying transaction’ It is fraud of the beneficiary, not the fraud of somebody else”. 33. In the, decision in Svenska Handelsbanken v. Indian Charge Chrome (JT 1993 (6) SC 189) the Supreme Court held: “We have referred to the observations of both Sabyasachi Mukharji as well as Shetty, JJ. in extenso to emphasise that in case of confirmed bank guarantees irrevocable letters of credit, it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud”. 34. The Supreme Court cautioned: “In law relating to hank guarantees, a party seeking injunction from encashing of bank guarantee by the suppliers has to show prima facie case of established fraud and an irretrievable injury.” 35. The observation in the said judgment to the following effect has got significance: “coming to the merits of the case itself it appears to us that the High Court totally misdirected itself in assuming that the present application for interim relief against the enforcement of bank guarantee is not to be decided strictly on principles of injunction in relation to bank guarantee but general principles of injunction on lenders would be applicable and on that basis proceeded to decide the matter.” 36. This clearly indicates that consideration which may be relevant in ordinary case of interim injunction is not sufficient in the case of a bank guarantee. This clearly indicates that consideration which may be relevant in ordinary case of interim injunction is not sufficient in the case of a bank guarantee. In this context the observation of the Supreme Court in the decision in United Commercial Bank v. Bank of India ( (1981) 2 SCC 766 ) is relevant: “It cannot be disputed that if the suit were to be brought by the Bank of India, the High Court would not have granted any injunction as it was bound by the terms of the contract. What could not be done directly cannot be achieved indirectly in a suit brought by the plaintiffs.” 37. In the decision in Banwari Lal v. Punjab State Co-op. S. & M. Federation Ltd. (AIR 1983 Delhi 86) it is held that 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. In Svenaka Handelsbanken's case (JT 1993 (6) SC 189) the Supreme Court quotes with approval the decision of Privy Council in A.L.N. Narayanan Chettiyar v. Official Assignee, High Court, Rangoon: (A.I.R. 1941 Privy Council 93) wherein the Privy Council held “fraud like any other charge of a criminal proceedings, must be established beyond reasonable, doubt. A finding as to fraud cannot be based on suspicion and conjecture”. In the decision in Centax (India) Ltd. v. Vinmar Impex INC ( (1986) 4 SCC 136 ) the Supreme Court observed: “It was observed that commitments of banks must be allowed to be honoured free from interference by the courts. Otherwise, trust in international commerce would be irreparably damaged.”. 38. Then the court referred the observation of Kerr, J. in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. (1977 (3) WLR 752) to the following effects; “It is only in exceptional cases that the courts will interfere with the machinery of irrevocable obligations assumed by banks. They are the life-blood of international commerce…………………………… Except possibly in clear cases of fraud of which the banks have notice, the courts will leave the merchants to settle their dispute under the contracts by litigation or arbitration as available to them or stipulated in the contracts.” 39. They are the life-blood of international commerce…………………………… Except possibly in clear cases of fraud of which the banks have notice, the courts will leave the merchants to settle their dispute under the contracts by litigation or arbitration as available to them or stipulated in the contracts.” 39. From the above, it is clear that in the absence of established fraud of which the bank has knowledge or irretrievable injustice the court will not interfere in the matter of bank guarantee. Here as noticed Ext. B6 though was received by the bank did not express any protest against honouring the demand either on the ground that the demand is not sufficient or that the demand is vitiated by fraud. The conduct of the bank in this regard is eloquent which cannot be missed in considering the contention of the first respondent that the bank can peruse admitted document and if it notices fraud, it is open to it to refuse the payment; and consequently the first respondent who is the affected party can institute a suit for injunction and seek an adinterim injunction. In this context, learned counsel relied on the observation of the Supreme Court in U.P. Co-operative Federatiea Ltd.'s case ( (1988) 1 SCC 174 ) referred to early; the same reads: “If the bank detects with a minimal investigation the fraudulent action of the seller, the payment could be refused. The bank cannot be compelled to honour the credit in such cases. But it may be very difficult for the bank to take a decision on the alleged fraudulent action. In such cases it would be proper for the bank to ask the buyer to approach the court for an injunction”. 40. First of all the first respondent has no case that the bank has ever expressed to its having detected any fraud much less the bank asked the first respondent to approach the court for an injunction. There is also no case that on a minimal investigation the bank detected any fraudulent act or omission on the part of the revision petitioner. 41. The attempt on the part of the learned counsel for the first respondent was to show that Ext. A-13 is sufficient to alert the bank as to the fraud committed by the revision petitioner, According to the learned counsel Ext. A-13 is relevant in another respect also. According to him Ext. 41. The attempt on the part of the learned counsel for the first respondent was to show that Ext. A-13 is sufficient to alert the bank as to the fraud committed by the revision petitioner, According to the learned counsel Ext. A-13 is relevant in another respect also. According to him Ext. A-13 would show that the contract had to be terminated not on account of any default committed by the first respondent, but was on account of paucity of funds for the revision petitioner to meet the expenses of the project. According to the learned counsel Ext. A-13 would show, an agreement to pay compensation to the first respondent which would necessarily imply that he was not in default. According to him inasmuch as both the revision petitioner and first respondent while were engaged in assessing compensation the invoking of the bank guarantee was fraudulent and therefore the first respondent is entitled to maintain the suit for permanent injunction. It was also contended by him that inasmuch as the contract has been terminated by Ext. A-13 and a new contract was substituted there is novation and on that reason also the petitioner was not entitled to invoke the bank guarantee. 42. It must immediately be observed no where in Ext. A-13 is there a reference to Ext. B1 bank guarantee. As has already noticed the bank guarantee is an independent and autonomous contract. In the circumstance it cannot be said to be controlled by Ext. A-13. The relevant portion of Ext. A-13 reads: ………………………………… “Progress of works on above contract was reviewed. Under the circumstances it was mutually agreed by the sides that the entire contract including the three buildings, presently under construction viz. First-Aid-Centre, Administrative Block, Canteen shall be terminated with immediate effect. Both sides will jointly determine the recoveries to be made by NPC as also compensation for losses to be paid to Asian Techs Ltd. consequent to this termination. For this purpose it was agreed that the representatives of both the sides will work-out the quantum of mobilisation carried out by the contraclor and assess the cost of the same based on relevant proofs of expenditure. The team shall also assess cost component of above mobilisation and salvaging value of these items on demobilisation and evaluate losses there of……………………………………………….” 43. Neither Ext. B1 bank guarantee nor Ext. The team shall also assess cost component of above mobilisation and salvaging value of these items on demobilisation and evaluate losses there of……………………………………………….” 43. Neither Ext. B1 bank guarantee nor Ext. A-13 required the petitioner to give notice to the first respondent before the petitioner enforces the bank guarantee. In the decision in ACC Babcock Limited v. Straw Products Ltd. (AIR 1985 Delhi 237) it is observed that a bank guarantee is fused with autonomy of its own without recourse to the underlying original contract and the Bank has to honour its obligations as per the bank guarantee. The obligation of the bank is absolute and irrevocable on demand for payment of the guaranteed amount by the defendant and is not dependent upon the correct decision of the disputes between the parties under the, original contract. The provision is also made in Ext. A-13 to find out the quantum of mobilisation carried out by the contractor. It cannot then be said that there was agreement or admission that the whole mobilisation amount was invested. 44. As regards the question of default the case of the first respondent is that he was not guilty of any default at all. Reliance was made by the first respondent on Exts. A7 and A8 wherein there is reference regarding budget constrains of the revision petitioner. In this connection it is necessary to refer to paragraphs 5 to 8 of the written statement of the revision petitioner wherein the revision petitioner contended that Ext. A-13 had to be entered into not because of paucity of funds but because the plaintiff was lagging behind in executing the work. Thus, there is dispute as to the cause for Germination of the contract. As noticed the contract was terminated on mutual agreement that itself would exclude any fraud in terminating the contract. As regards the reason for the termination the same is a disputed question of fact which has to be established in the suit which the first respondent has admittedly instituted before the High Court of Bombay for compensation. One significant aspect to be noticed is clause 2 of Ext. B1 made the revision petitioner the sole authority to decide as to the default and the decision of the revision petitioner in terms of Ext. B1 is binding on the second respondent. The fraud now alleged certainly is not one that could over throw the underlying contract. One significant aspect to be noticed is clause 2 of Ext. B1 made the revision petitioner the sole authority to decide as to the default and the decision of the revision petitioner in terms of Ext. B1 is binding on the second respondent. The fraud now alleged certainly is not one that could over throw the underlying contract. It is pointed out by the learned counsel for the revision petitioner that in the original plaint, there was no pleading at all as regards fraud and paragraphs 10(A) to 10(D) of the plaint was incorporated by amendment at the time when the revision was pending. Of course the amendment relates back to the date of the suit. What is urged by the learned counsel for the revision petitioner is, at the time when the courts below passed the orders, there was no allegation as regards fraud in the plaint. The evidence does not prima facie prove established fraud so as to qualify the first respondent for the injunction prayed for. 45. Learned counsel for the respondents relied on the decision in Banerjee & Banerjee v. Hindusthan Steel Works Construction Ltd. (AIR 1986 Calcutta 374) in support of his contention that the Court can interfere when there is suppression of material facts by the beneficiary while seeking enforcement of bank guarantee. In that case, there was suppression of material facts in the demand letter which the court held gave rise to special equity in favour of the petitioner to stop payment by the bank on the basis of the demand letters. Here, there is neither a case that Ext. B6 suppressed material facts nor Ext. B6 show suppression of any material facts. The contention was only that Ext. B6 did not specifically mention of default by the first respondent. The decision is distinguishable and has no application to the facts of this case. 46. A contention that by virtue of Ext. A-13 a new contract has been substituted, in the circumstance too is not persuasive to be accepted; all that has been done by Ext. A-13 is to terminate the contract by mutual agreement and to provide for the machinery for the assessment of compensation and investment mobilisation amount etc. That cannot be construed to mean that a new contract was substituted. The contention that the liability of the second respondent under Ext. B1 stands discharged also is not acceptable. A-13 is to terminate the contract by mutual agreement and to provide for the machinery for the assessment of compensation and investment mobilisation amount etc. That cannot be construed to mean that a new contract was substituted. The contention that the liability of the second respondent under Ext. B1 stands discharged also is not acceptable. Even as per Ext. A-13 assessment, as regards the investment has to be made. The argument on the basis of the decision in Pratapsing v. Keshsvlal ( AIR 1935 PC 21 ) that the liability of the 2nd respondent stands discharged on account of Ext. A-13 as he is a surety, also is not acceptable because so far as the bank guarantee is concerned the said principle cannot be invoked. The contention that the bank is in the position of a surety under Section 126 of the Contract Act cannot be sustained because that in effect is to make the bank guarantee as part of the underlying contract. In the decision in Premier Tyres Ltd. v. S.T.C. of India Ltd. (1981 (51) Company Cases 316) a Division Bench of the Delhi High Court did not accept the contention that bank is in the position of a surety under Section 126 of the Contract Act. The court observed: “Mr. Ray had also tried to invoke S. 126 of the Contract Act, which defines a contract of guarantee as a contract to perform the promise or discharge the liability of a person in case of his default, to urge that the bank was in the position of a surety and unless the principal debtor (i.e., the appellant) was first held liable, the bank cannot be made to pay. This is again in another form the same argument for treating the bank guarantee as an integral part of the main contract, which we have rejected. Now, the payment under a bank guarantee like payment under the letter of irrevocable credit becomes due on the happening of a contingency, on the occurrence of which the guarantee becomes enforceable, but it is wrong to treat such a bank guarantee, as a guarantee under S. 126 of the Contract Act, which speaks of three persons with reference to the contract; it is rather in the nature of a contract of indemnity under S. 124 of the Contract Act, which requires two persons”. 47. 47. In the circumstance of the case it is not possible, prima facie, to hold that on account of Ext. A-13 Ext. B1 stands discharged. 48. As noticed, by virtue of Clause 2 of Ext. B1 the decision of the revision petitioner as to default of the first respondent is final and binding on the bank. In C.M.A. No. 86 of 1993 the Division Bench of this Court also observed: ‘We are of opinion that ‘the court below has gone wrong in discussing the dispute with regard to the underlying contract and net treating the performance guarantee as an autonomous and independent contract.” 49. The enforcement of the bank guarantee thus cannot be subject to the rights and liabilities arising under the underlying contract. As already noticed, there is no prima facie evidence of fraud. 50. Then the only question that would remain is whether in not allowing the prayer of the first respondent for injunction, it will be put to irretrievable injury. The point urged by the learned counsel is so long as the claim of the first respondent for compensation is pending, it is unjust to permit the revision petitioner to enforce the bank guarantee. It cannot be said that by such enforcing the bank guarantee the revision petitioner has no remedy at all to get appropriate relief. The enforcement of the bank guarantee cannot wait till his claim for compensation is adjudicated in the suit that he has instituted before the Bombay High Court. In the decision in B.L.R. Mohan v. P.S. Co-op. S. & M. Federation Ltd. (AIR 1982 Delhi 357) it is observed: “The existence of disputes between the parties under the primary contract or the possibility of a reference of these disputes to arbitration or of the pendency of proceedings on such a reference, have absolutely no relevance to the obligation of the bank under the guarantee. The principle of audi alteram partem has no application to contractual relationship particularly, where the parties have themselves entered into the arrangement in terms of which the banker of a party is bound to pay without demur to the other on mere demand. The principle of audi alteram partem has no application to contractual relationship particularly, where the parties have themselves entered into the arrangement in terms of which the banker of a party is bound to pay without demur to the other on mere demand. The enforcement of a guarantee or the payment by the bank of any amount under the guarantee is, however, not conclusive of the rights and obligations of the parties under the primary contract and the payment by the bank ultimately abides the eventual adjudication of the disputes. It would therefore, be stretching the principle of audi alteram partem beyond the strain it can stand to apply it to contractual relations between the parties.” 51. When injunction is sought on the ground of irretrievable injury, one should be aware as to the character of the contract of bank guarantee and the limited jurisdiction, the court exercise in such matters. The endeavour should be to enforce, the bank guarantee. In the decision in Alliance Mills (Lessees) Pvt. Ltd. v. Union of India (AIR 1985 Calcutta 112) it is held: “The Courts will do their utmost to enforce it according to its terms. They will not, in the ordinary course of things, interfere by way of injunction to prevent its due implementation”. 52. In such circumstance, it cannot be said that the first respondent will be put to irretrievable injury unless the injunction is issued. Though the trial court adverted to clause 2 of Ext. B1, it did not give importance to the effect of the said clause, and the lower appellate court did not advert to clause 2 of Ext. B1. The approach made by the court below to judge the right of the first respondent to get injunction on the basis of the underlying contract cannot be justified, and the court below failed to note the nature of fraud and irretrievable injury to be established by the first respondent. There must be proof of established fraud and the apprehension of the injury must be such that the same is irretrievable. The courts below were wrong in concluding that the first respondent was entitled to an order of injunction. In view of the said conclusion the orders of the courts below are set aside and I.A. 882 of 1992 is dismissed. In the result the C.R.P. is allowed.