ORDER Dipak Misra, J. 1. State of M.P. and its functioneries have preferred this appeal challenging the orders dated 25.9.93, and 7.12.93 passed by the learned Distt, Judge, Satna in C.S. No. 42-A/92. 2. The facts as have been unfurled are that in response to a tender notice dated 17.6.91 for disposal of tendu leaves contained in lot No. 1964 and others consisting of 1485. 755 slandered bags, the plaintiff/respondents No. 1 offered a tender to purchase the same @ Rs. 677-10 per standard bag. The aforesaid was accepted and an agreement was executed. In pursuance of the agreement the respondent No. 1 furnished a bank guarantees to the tune of Rs. 3,01,802/- equal to 30% of the purchase price (excluding taxes). The delivery was to be made on receipt of four equal instalments, payable on 1.10.91, 15.11.91, 1.1.92 and 15.2.92. The respondent 1 paid the first instalment amounting to Rs. 51, 501-10 and obtained delivery against the aforesaid payment equal to 1/4th of the total lot. As far as second instalment is concerned, he did not obtain delivery of possession by making cash payment but against the bank guarantee which had been furnished by him. The delivery was made against the bank guarantee in view of the terms of the agreement. The said delivery was effected on 11.9.91. Thus the respondent 1 received the delivery of the of the stock by making payments in the aforesaid manner. The plaintiff took away the leaves and the present appellants requested the bank to make payment against the bank guarantee. When there was a request to the bank for encashment of the same the respondent instituted the civil suit bearing No. 42-A/92 before the Distt. Judge, Satna and moved an application restraining the defendants from encahing the bank guarantee. By order dated 9.5.92 the Distt. Judge, Satna passed an order of temporary injunction restraining the defendants from emchashing the bank guarantee. Subsequently on 30.6.92 he modified the earlier order and held that the plaintiff was obliged to pay the purchase price of the second instalment of which he had already taken delivery. By order dated 27.1.93 the learned Distt. Judge further directed the plaintiff to make the payment of purchase price of tendu leaves of instalment No. 2 and thereafter he was to be permitted to the good leaves out of the remaining stock of the lot. By order dated 27.1.93 the learned Distt. Judge further directed the plaintiff to make the payment of purchase price of tendu leaves of instalment No. 2 and thereafter he was to be permitted to the good leaves out of the remaining stock of the lot. The plaintiff/respondent 1 paid the sum of Rs. 315380.80 against the payment of Rs. 318882-58 which included the purchase price and the interest thereon amounting to Rs. 67301.40. On this payment being made the plaintiff moved an application before the learned Distt. Judge praying therein that the amount of interest demanded and paid by him was not justified and the amount of interest should be refunded to him. The learned Distt. Judge by order dated 4.3.92 directed not to charge the amount of interest in case the plaintiff furnished security to the tune of Rs. One lakh. The security was furnished before the Court on 11.3.93. On furnishing the security the plaintiff made a request for refund of the interest already received from him. He also took delivery of 15.55 standard bags of tendu leaves out of the remaining stock which was to be delivered on payment of 3rd and 4th instalments by making payment of Rs. 677-10 per bag amounting to Rs. 12612.60 Tendu leaves which were to be delivered against payment of 3rd and 4th instalments and which were not taken by plaintiff/respondents 1 had to be resold for the breach of the terms of the conditions of the agreements. As the leaves are perishable commodity, it was thought proper to sell them in auction. The appellants sold 729.329 standard bags of tendu leaves out of total lot of 1485.755 standard bags, in an open auction Rs. 55/- per standard bag. The appellants had no option but to resale tendu leaves, as the plaintiff had failed to honour the terms of the agreement and had not paid 3rd and 4th instalments. Before putting the lot to reauction the agreement was terminated. The plaintiff had directed to pay a sum of Rs. 534548-06 towards the difference in the sale price. 3. When the matter stood thus the plaintiff tiled an application for release of the bank guarantee. The Court on 25.9.93 directed that in case the plaintiff furnished security equal to the amount of the bank guarantee the same would be released. The plaintiff had directed to pay a sum of Rs. 534548-06 towards the difference in the sale price. 3. When the matter stood thus the plaintiff tiled an application for release of the bank guarantee. The Court on 25.9.93 directed that in case the plaintiff furnished security equal to the amount of the bank guarantee the same would be released. The plaintiff did not furnish the security and the bank guarantee remained intact. However, later on the plaintiff filed an application for modification of the order dated 5.9.93. The learned Distt. Judge by his order dated 7.12.93 came to hold that the appellants are not justified in withholding the amount of Rs. 50421/- which was deposited in excess, as the plaintiff had already furnished security to the tune of rupees one lakh as directed by the Court. Repelling the submission of the State authorities that they had sustained loss due to breach of the agreement by the plaintiff and therefore, there was justification for detention, the Court directed the said sum to be released as security in that regard had already been furnished the said order in the cause of the grievance of the present appellants. 4. Assailing the aforesaid order Shri S.L. Saxena learned Advocate General alongwith Mr. M.L. Chaubey has submitted that the approach of the Court below is absolutely erroneous in as much as the claim advanced by the appellants is Rs. 534548/- and the amount covered in the bank guarantee is Rs. 301882/- and even after adjustment of Rs. 51421/- there will be no coverage for more than Rs. 170000/- and, therefore, there was no justification on the part of the Court below to direct the appellants to pay the amount. Mr. Dhande learned counsel appearing for the respondent No. 1 has contended that as security to the tune of Rs. One lakh has already been furnished the appellants should not be permitted to retain the amount and the order passed by the learned District Judge being passed as a consequence of the earlier order the same does not call for interference in the present appeal. 5. I have perused orders dated 25.9.93 and 7.12.93. One lakh has already been furnished the appellants should not be permitted to retain the amount and the order passed by the learned District Judge being passed as a consequence of the earlier order the same does not call for interference in the present appeal. 5. I have perused orders dated 25.9.93 and 7.12.93. On a perusal of the order dated 7.12.93 I find that the learned District Judge has not accepted the stand of the State Authorities for detention of the amount which was collected by them towards interest on the ground that the had already directed bank guarantees to be released on payment of security. As contended by the learned Advocate General the State has suffered a loss of Rs. 53,45,48/- and the bank guarantee covers slightly more than 3 lakhs, and therefore, there is no error on their part in restraining the amount of Rs. 51421/- with them. I notice from the various orders passed by the Court below that on number of occasions orders have been passed relating the encashment of bank guarantee and the control of the Court thereon and furnishing of security in relation to it and the State's prayer for retention of the same towards the loss claimed. While finally dealing with the prayer of the parties the Court on 7.12.93, which is the subject matter of challenge, has taken the view that there was no justification on the part of the State authorities to retain the sum. While dealing with a matter like this I think it is appropriate to state the law relating to encashment of bank guarantee and Court's jurisdiction relating to interference with it. An order of injunction relating to the realm of encashment of bank guarantee has to be guided by different yard sticks and parameters. This aspect was high lighted by the Apex Court in the case of Tarapore & Co. Madras v. Tractors Export. A.I.R. 1970 S.C. 891 wherein it observed as follows:- An irrevocable letter of credit has a definite implication. It is a mechanism of great importance in intention trade, any interference with that machinism is bound to have serious repercussions on the international trade. Except under very exceptional circumstances, the Courts should not interfere with that mechanism. In that case the Lordships further expressed in the following terms: . . . . It is a mechanism of great importance in intention trade, any interference with that machinism is bound to have serious repercussions on the international trade. Except under very exceptional circumstances, the Courts should not interfere with that mechanism. In that case the Lordships further expressed in the following terms: . . . . The letter of credit is independent of an 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. In the case of United Commercial Bank v. Bank of India A.I.R. 1981 S.C. 1426, their Lordships expressed as under:- .....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 cridit. The said principle was reiterated in the case of Maharashtra Electricity Board v. The Official Liqidator A.I.R. 1982 S.C. 1497, and in the case of Contax (India) Ltd. v. Vinmar Impex Inc. A.I.R. 1986 S.C. 1924. Approving the view taken earlier Hon'ble Sabyasachi Mukharji, J. (as his Lordship then was), in the case of U.P. Cooperative Faderation Ltd. v. Consultants and Engineers (P) Ltd. 1988, 1 S.C.C. 174 laid down the guidelines in the matter of grant of injunction in respect of the bank guarantee and expressed in unequivocal terms thus:- .......I reiterate that compliments of banks must be honoured from from interference by the Courts. Otherwise, trust in commerce internal and international would be irreparable damaged. It is only exceptional cases that is to say in case of fraud or in case of irretrivable injustice be done, the Court should interfere. The aforesaid view was again highlighted by the Apex Court in the case of General Electric Technical Services Company Ind. V. Punj. Sons (P) Ltd. A.I.R. 1991 S.C. 1994, wherein their Lordships after referring to the case of U.P. Cooperative Federation Ltd. (Supra) held as follows:- If the documentary credit are irrevocable and independent, the Bank must pay when demand is made. V. Punj. Sons (P) Ltd. A.I.R. 1991 S.C. 1994, wherein their Lordships after referring to the case of U.P. Cooperative Federation Ltd. (Supra) held as follows:- If the documentary credit are irrevocable and independent, the Bank must pay when demand is made. Since the Bank pledges its own credit involving its reputation, it has no defence except in the case of fraud. The Bank's obligation of course should not be extended to protect the unscrupulous party, that is, the party who is responsible for the fraud. But the banker must be sure of his ground before declining to pay. The nature of the fraud that the Courts talk about is fraud of an "agragious nature as to vitiate the entire underlying transaction." It is fraud of the beneficiary, not the fraud of somebody else. Similiar view was expressed in ease of Svenara Mandelabanken v. M/s Indian Charge Chrome & Ors. A.I.R. 1994 S.C. 626. Recently in the ease of Hindustan Steel Workers Construction Ltd. v. G.S. Atwal & Co. (Engineering) Pvt. Ltd. A.I.R. 1996 S.C. 131, it was expressed by their Lordships as under:- Where a bank unconditionally agreed to pay to party to whom guarantee was given to pay on demand sums specified therein and amount specified was to be paid without demur and without requiring creditor, boneficiary, to invoke legal remedy and there was specific provision that beneficiary was to be sole judge as to whether party furnishing guarantee has committed breach of contract and as to extent of loss and damages and decision of the beneficiary as to amount was final and binding, the order of Court restraining beneficiary from enforcement guarantee till disposal of proceedings pending before arbitrator as to disputes between beneficiary and party furnishing guarantee was illegal and without jurisdiction. 6. In the case of State of Maharasthra v. National Construction Co. 1996 (1) S.C.C. 735 , the Apex Court reiterating the earlier principles held as under:- The rule is well established that a bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. The duty of the bank under a performance guarantee is created by the document itself. Once the documents are in order, the bank giving the guarantee must honour the same and make payment. The duty of the bank under a performance guarantee is created by the document itself. Once the documents are in order, the bank giving the guarantee must honour the same and make payment. Ordinarily, unless there is an allegation of fraued or the like, the Courts will not interfere, directly or indirectly, to withhold payment otherwise trust in commerce, internal and international would be irreparably damaged. 7. From the aforesaid decisions it is clear as day that in exceptional cases the Court can interfere in the matter of encashment of bank guarantee taking into consideration concept of fraud as understood and on consideration of the scope of irretrievable injury and special equities in favour of the party seeking relief. Another aspect winch has to be appreciated is the nature of the guarantee. It admits of no doubt that in very exceptional cases indictment of the Court may be essential in the matter of encashment of bank guarantee and the grounds which are required for such interference are cumulative. 8. This being the position of law relating to bank guarantee, when the learned District Judge was considering the matter for retention as well as release of the bank guarantee by order dated 7.12.93 he should have kept himself alive to the same. I am conscious that initially there has been an order of injunction restraining encashment of bank guarantee and the State was satisfied if the bank guarantee was kept intact. But while reiterating the aspect of release and further directing the defendants to pay the differential amount relating to interest the Court should have delay with the application in proper perspective. In view of this I am of the considered opinion that the learned District Judge should reconsider the matter and accordingly orders dated 25.9.93 and 7.12.93 are hereby set aside. The District Judge should hear the parties afresh keeping in view the law and the observations made above. 9. Resultantly, the appeal is allowed to the extent indicated above. However, there shall be no order as to costs. Appeal allowed