JUDGMENT D. K. Seth, J. - This appeal was preferred under Section 39 of the Arbitration Act by defendant No. 1 appellant against an order passed in proceedings under Section 20 of the Arbitration Act by the learned Civil Judge, Kheri. 2. The plaintiff entered into an agreement for supply of some equipments referred to therein on 9th May, 1989. The said contract contained certain clauses for furnishing Bank guarantee for due performance of the contract. One such bank guarantee was furnished by the plaintiff through the defendant No. 2 in favour of defendant No. 1 in terms of clause 16.2 of the said contract. The said Bank guarantee dated 12th July, 1989, however, was renewed from time to time and was kept alive till 30th June, 1992. The said bank guarantee was invoked by defendant No. 1 on 23rd June, 1992. 3. The plaintiff instituted proceedings under Section 20 of the Arbitration Act wherein by an order dated 31st May, 1994, the dispute between the parties was referred to arbitration in terms of Clause 18 of the contract and the defendant No. 1 was restrained from invoking the Bank guarantee which was also made part of the dispute referred to the Arbitrator. 4. Against the said order dated 31st May 1994, the present appeal has been preferred by defendant No. 1. Along with the said appeal, an application for stay of the order appealed against has since been filed. Notices having been given, the plaintiff-respondent has entered appearance and filed its counter-statement. 5. At the time of the hearing of the said application, it appeared to us that no useful purpose will be served by keeping the appeal pending while disposing of the application for stay since it is necessary to go into the merits of the said order. The learned counsels appearing for the respective parties having agreed to the final disposal of the appeal have made their respective submissions. 6. In support of the appeal and the application for stay which we heard together, the learned counsel for the appellant drew our attention to the contract dated 9th May, 1989 containing the agreement filed along with an affidavit. 6. In support of the appeal and the application for stay which we heard together, the learned counsel for the appellant drew our attention to the contract dated 9th May, 1989 containing the agreement filed along with an affidavit. In clause 16.2, we find that the plaintiff was required to furnish a Bank guarantee from any Nationalised or Scheduled Bank in respect of timely delivery of the equipments in terms of clause 15.1.2 which shall be valid till the said equipments were delivered. He also drew our attention to clause 18 of the said contract which contained the arbitration agreement and pointed out that the dispute arising out of the said agreement shall be subject matter of arbitration. He also drew our attention to the bank guarantee, a copy where of is annexed with the application for stay and points out that in view of the clauses contained in the said Bank guarantee, no injunction against invocation of Bank guarantee could be granted. 7. The learned counsel for the respondents submits that the Bank guarantee could not be valid beyond the date of supply of the equipment. The equipments having been supplied, the Bank guarantee could not be invoked. According to him, the Bank guarantee was invoked long after the equipments were supplied. The Bank guarantee was invoked in breach of clauses 15.1.1, 16.2, 16.3 and 16.4 of the principal agreement. 8. The learned counsel for the appellant further submitted that the Bank guarantee is a contract under the agreement independent of the principal contract. Therefore, the same cannot form subject matter of the dispute. 9. The learned counsel for the respondent submits that the Bank guarantee having been furnished in terms of clause contained in the principal agreement by virtue of clause 18 contained in the arbitration clause, the same forms the subject matter of the arbitration. 10. We have heard the respective contentions of both the parties and have perused the documents referred to by them. 11. It is true that the Bank guarantee was furnished pursuant to clause 16.2 of the principal agreement. The furnishing or non-furnishing of Bank guarantee could be the subject matter of dispute in the arbitration but the question of invocation of Bank guarantee could not be the subject matter of the arbitration agreement in the facts and circumstances of the case. It is true that the Bank guarantee was furnished pursuant to clause 16.2 of the principal agreement. The furnishing or non-furnishing of Bank guarantee could be the subject matter of dispute in the arbitration but the question of invocation of Bank guarantee could not be the subject matter of the arbitration agreement in the facts and circumstances of the case. Inasmuch as the principal agreement was entered into by and between the plaintiff and defendant No. 1 in which the defendant No. 2 was not a party. Whereas the Bank guarantee was given by defendant No. 2 in favour of defendant No. 1 by virtue of agreement under, a contract which is independent of the principal agreement. The terms contained in the Bank guarantee are necessary to be quoted in order to appreciate the situation. The text of the necessary clauses therein are as hereunder : "(1) In consideration of the premises, the Guarantor hereby undertakes to pay to the Purchasers within three days of demand and without demur such sum not exceeding Rs. 11,05,000/-, (Rs. Eleven Lakhs Five Thousand Only) as the purchasers may demand and the Guarantor fails to pay the same within the said period the Guarantor shall also pay on the sum demanded interest at the Bank lending rate then prevailing reckoned from the expiry of the said three days till the date of payment. 11,05,000/-, (Rs. Eleven Lakhs Five Thousand Only) as the purchasers may demand and the Guarantor fails to pay the same within the said period the Guarantor shall also pay on the sum demanded interest at the Bank lending rate then prevailing reckoned from the expiry of the said three days till the date of payment. (2) The Guarantor shall pay to the purchasers on demand the sum under clause 1 above without demur and without requiring the purchasers to invoke any legal remedy that may be available to them, it being understood and agreed Firstly that the Purchasers shall be the sole judge of and as to whether the Sellers have committed any breach(es) of the terms and conditions of the said Agreement and the extent of losses, damages, costs charged and expenses caused to or suffered by the Purchasers from time to time shall be final and binding on the Guarantor and Secondly that the right of the Purchasers to recover from the Guarantor any amount due to the purchasers under this Guarantee shall not be affected or suspended by reasons of the fact that any dispute or disputes have been raised by the Sellers with regard to their liability or that proceedings are pending before any Tribunal, Arbitrators or court with regard thereto or in connection therewith, or Thirdly that the Guarantor shall immediately pay the aforesaid Guaranteed amount to the Purchasers on demand and it shall not be open to the Guarantor to know the reasons of or to investigate or to go into the merit of the demand or to question or to challenge the demand or to know any facts affecting the demand, And Lastly in the said Agreement for which the stipulated date according to the terms and conditions of the said Agreement is 15-10-1989 but if the said date is extended for any reason whatsoever and upon such extension the Sellers fail to furnish a fresh or renewed Guarantee to the satisfaction of the Purchasers for the corresponding extended period, the Guarantor shall pay to the Purchasers the said sum of Rs. 11,05,000/- (Rs. Eleven Lakhs Five Thousand Only) or such lesser sum as the Purchasers may demand." 12. An examination of clause 1 reveals that the Bank had agreed and undertook to pay on demand without demur. Clause 2 further clarifies the position and identifies the nature of guarantee given. 11,05,000/- (Rs. Eleven Lakhs Five Thousand Only) or such lesser sum as the Purchasers may demand." 12. An examination of clause 1 reveals that the Bank had agreed and undertook to pay on demand without demur. Clause 2 further clarifies the position and identifies the nature of guarantee given. Clause 2 is very explicit and has taken care of all possible hindrances and has incorporated every kind of it. It has also included the possibility of disputes and pendency of reference before any Tribunal or Arbitrator and that the Bank guarantee could be invoked notwithstanding any of the conditions mentioned in Clause 2. The learned counsel for the appellant, referring to the judgment in the case of U.P. State Bridge Corporation Limited v. M/s. National Building Construction Limited (1993 (II) LCD 275), submitted that in no event, invocation of Bank guarantee could be restrained. Further referring to the decision in Hindustan Paper Corporation Limited v. Keneilhouse Angami (1990 Vol. 2 Banking Commercial Law Rep 1), he had submitted that Bank guarantee being an independent contract cannot be subject matter in the arbitration and, therefore, the same cannot be prohibited by an order of injunction. 13. The learned counsel for the respondents assailed the submission of the learned counsel for the appellant and submits that in the facts and circumstances of the case, the Bank guarantee could not be invoked. 14. Upon examination of pleadings, we do not find that any ground of fraud has ever been made by the plaintiff as regards the Bank guarantee or that the Bank is about to pay the defendant any amount exceeding the amount covered by the Bank guarantee. The admitted position is that the Bank guarantee was admittedly given and the same stood renewed unto 30th June, 1992 and that nothing in excess covered by the guarantee was being invoked. 15. In the circumstances, the question is confined as to whether the reference of the dispute under Clause 18 includes the invocation of the Bank guarantee. In other words, whether the invocation of Bank, guarantee could form subject matter of dispute in view of Clause 18 aforesaid. To be more precise whether the Bank guarantee was a part of the principal agreement. 16. Admittedly the defendant No. 2 was not a party to the principal agreement. In other words, whether the invocation of Bank, guarantee could form subject matter of dispute in view of Clause 18 aforesaid. To be more precise whether the Bank guarantee was a part of the principal agreement. 16. Admittedly the defendant No. 2 was not a party to the principal agreement. Therefore, the Bank guarantee cannot form subject matter of dispute in terms of clause 18 of the principal agreement between the plaintiff and defendant No. 1. In view of the express expression used in the Bank guarantee, a commercial document appears to be invocable without any demur notwithstanding any objection of the plaintiff. In para 12 of the case of Hindustan Paper Corporation Limited (supra), their Lordships of the Division Bench of the Calcutta High Court were pleased to lay down : "12. In our opinion the points is well settled. A Bank Guarantee may be furnished in terms of a particular contract between two parties. In terms of the condition of the contract a Bank Guarantor may be provided by a Bank in favour of one of the parties to the original contract (hereinafter) called as beneficiary). As to the question of enforcement of the Bank Guarantee by the beneficiary against the Bank, the rights and liabilities are to be governed by the Bank Guarantee itself and not by the terms and conditions of the original contract. The Bank guarantee itself is a contract separate from the original contract pursuant to which the Bank Guarantee is furnished. The Bank is not a party to the original contract. Similarly, the party at whose instance the Bank Guarantee is furnished pursuant to the agreement, is not a party to the Bank Guarantee. The Bank Guarantee is to be there enforced if it complies with the terms and conditions of the Bank Guarantee itself and not whether is any default or breach of the terms and conditions of the main contract. If the condition for payment under the Bank Guarantee is fulfilled, then such payment is to be made to the beneficiary though ultimately it may be open to the party at whose instance the Bank Guarantee was furnished to file a suit for damages against the other parties to the contract. If the condition for payment under the Bank Guarantee is fulfilled, then such payment is to be made to the beneficiary though ultimately it may be open to the party at whose instance the Bank Guarantee was furnished to file a suit for damages against the other parties to the contract. It is open to such parties also to file any suit against the bank for recovery of any amount, if any, if the bank has acted contrary to the transaction between the Bank and such other parties. That is no ground for holding that the original contract is to be treated as part of the Guarantee or that the arbitration agreement in the original contract can be incorporated in the Bank Guarantee. If the two contracts are separate, the arbitration clause in the original contract cannot be imported in the contract of Bank Guarantee. In that event the arbitration clause in the parent contract cannot include the question as to whether the terms and conditions of the Bank Guarantee has been fulfilled. Whether the Bank Guarantee is enforceable or not does not depend on the terms and conditions of the original contract. In this particular case clause (b) as such makes it quite clear that the alleged dispute sought to be raised therein, is the dispute regarding the right of the beneficiary under the Bank guarantee to enforce the Bank guarantee as against the Bank. It has nothing to do with any breach of contract by the beneficiary under the parent contract. A claim arising out of a Bank guarantee is not a dispute arising out of the original contract. As we have pointed out, clause (b) as such relates to the right of the beneficiary against the Bank on the basis of the said Bank guarantee and not the right of the beneficiary as such against the other party to the contract under the said original contract. The original arbitration agreement may be very wide or general in terms, but that certainly does not include a dispute arising under a separate agreement with a separate party, that is, the Bank guarantee and the Bank." 17. The original arbitration agreement may be very wide or general in terms, but that certainly does not include a dispute arising under a separate agreement with a separate party, that is, the Bank guarantee and the Bank." 17. In the case of U.P. State Bridge Corporation Limited (supra), it was held that the Bank guarantee is a contract of guarantee within the meaning of Section 126 of the Contract Act and it is an important instrument in international trading of a country and is also an accepted mode of international trade. It is essentially an agreement between the Bank and beneficiary of the guarantee. That the Bank guarantee would not be interfered with by issuing any order of the injunction if the Bank guarantee is unequivocal in terms and is not made conditional on the default of the person in whose behalf the guarantee is given except in case of fraud or where irretrievable injustice would result. 18. In the case of General Electric Technical Services Company Inc. v. M/s. Punj Sons (P) Ltd. (1991 (3) SC 360), it has been laid down : "The law as to the contractual obligations under the Bank guarantee has been well settled in a catena of cases. Almost all such cases have been considered in a recent judgment of the court in U.P. Co-operative Federation Limited v. Singh Consultants & Engineers (P.) Ltd., (supra) wherein Sabyasachi Mukharji, J. as he then was, observed (at 189) that in order to restrain the operation either of irrevocable letter of credit or of confirmed letter of credit or of Bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties." 19. According to us, 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 other contract including underlying or primary one. The performance of the underlying contract comes into picture only if guarantee itself makes its encashment subject to proof of performance of formal contract. If its encashment does not depend on any condition or performance of underlying contract, then the autonomy and independence of such contract is absolute. The performance of the underlying contract comes into picture only if guarantee itself makes its encashment subject to proof of performance of formal contract. If its encashment does not depend on any condition or performance of underlying contract, then the autonomy and independence of such contract is absolute. A Bank Guarantee for all purposes should be taken to be a credit note issued by the bank in favour of the person in whose favour the Bank guarantee has been issued and it should be encashable just like a credit note ordinarily unless the intention of the parties is other wise. The consistent view of the court in the case of invocation of Bank guarantee and enforcement thereof by the beneficiaries is that the court would usually restrain from granting injunction to restrain the performance of contractual obligation arising out of a letter of credit or a Bank guarantee and it would be only in exceptional cases when there are allegation of fraud or irretrievable injustice would result that ad interim injunction would be issued restraining the Bank from making payment under the Bank guarantee. It is well settled that there should not be interference in trade. Commitments of Bank must be honoured free from interference by the court. It is the duty of the court to do their utmost to enforce the Bank guarantee according to its terms and will not ordinarily interfere by way of injunction to prevent its encashability. Such interference would destroy the trust in international commerce. The trading affairs of a country shall be irreparably damaged. Contract of Bank guarantee is of paramount importance. 20. In the present case, the terms of the Bank guarantee is clearly unequivocal, independent and autonomous and does not depend either on default or on happening of any incident. The terms of contract, as quoted hereinbefore, is clear and unambiguous. In that view of the matter, in the facts and circumstances of the present case, there is no justification warranting injunction prohibiting encashment of the present Bank Guarantee. Clause 18 of the principal contract does not include the invocation of the Bank guarantee in view of our observations made herein before. Therefore, there cannot be any reason to restrain invocation of the Bank guarantee in the present case. 21. Clause 18 of the principal contract does not include the invocation of the Bank guarantee in view of our observations made herein before. Therefore, there cannot be any reason to restrain invocation of the Bank guarantee in the present case. 21. We, therefore, hereby allow the appeal to the extent of setting aside the order of injunction restraining the invocation of the Bank guarantee as contained in the order dated 31st May, 1994 while we decline to interfere with the rest of the order referring the dispute to arbitration under Section 20 of the Arbitration Act. 22. In the result, the appeal is allowed in part to the extent indicated above. There will be no order as to costs. 23. Judgment pronounced under Chapter VII, Rule 1(2), of the Rules of the court. Appeal partly allowed.