JUDGMENT : 1. This is an appeal under Section 37 of the Arbitration and Reconciliation Act, 1996 (hereinafter referred to as the ‘Arbitration Act’). The order under challenge is an order passed on 8.9.1997 by the District Judge, Haridwar in Case No. 182/2017 on an application moved under Section 9 of the Arbitration Act by the KLA Construction Technologies Pvt. Ltd., which is respondent no. 1 before this Court. 2. The facts of the matter are that Acrony India Private Limited entered into a contract with the present appellant Kajima India Private Limited for construction of a factory building at SIDCUL, Haridwar. Kajima India Private Limited, in turn, sub-contracted this work to KLA Construction Technologies Private Limited (respondent no. 1 before this Court). Both the parties entered into a separate agreement on 11.9.2015. As of now, the building has been constructed and possession has been handed over to the appellant. All the same, there are certain disputes pending between the parties, for which the arbitration clause was invoked. Respondent no. 1 had approached this Court for appointment of Arbitrator under Section 11 (6) of the Arbitration Act. This Court has already appointed an Arbitrator on 5.10.2017 and the learned Arbitrator is as of now seized with the matter. 3. Prior to 5.10.2017, however, respondent no. 1 had moved an application before the learned District Judge under Section 9 of the Arbitration Act. The interim relief sought was that the Bank guarantee, which was executed in favour of the present appellant, should not be en-cashed and, the appellant be restrained from en-cashing the Bank guarantee. On the said application, an order has been passed on 8.9.2017 restrained the appellant from en-cashing the Bank guarantee, an order which is presently challenged in the present appeal. 4. The Court below after hearing both the parties, passed an order allowing the application under Section 9 of the Arbitration Act and has restrained the present appellant from en-cashing the bank guarantee, till the conclusion of the arbitration proceedings. 5. The principal ground for challenge of the order dated 8.9.2017 by the appellant is that a bank guarantee is normally not stayed and the Court’s interference in such matters is on extremely limited grounds, such as when there a fraud, or when there is a case of irretrievable loss. Mr. 5. The principal ground for challenge of the order dated 8.9.2017 by the appellant is that a bank guarantee is normally not stayed and the Court’s interference in such matters is on extremely limited grounds, such as when there a fraud, or when there is a case of irretrievable loss. Mr. Rahul Malhotra, counsel for the appellant would argue that in the application moved under Section 9 of the Arbitration Act by the respondent no. 1, no such grounds were raised by the applicant for restraining the present appellant from en-cashing the bank guarantee. Section 9 application moved by the respondent no. 1 is annexed as Annexure No. 6. The grounds raised were that the applicant (respondent no. 1 before this Court) has completed the construction of the factory, which is now under the occupation of Kajima India Private Limited (appellant before this Court). The appellant have to give an amount of more than rupees five crores to the applicant, but instead of giving this amount, they are going to en-cash the bank guarantee, which is Rs. 66,34,846/-.It has further been said in the application that the proceedings for appointment of Arbitrator are going on and till the appointment of the Arbitrator or till the conclusion of the arbitration proceedings, Kajima India Private Limited be restrained from en-cashing the bank guarantee. 6. Present appellant moved objections to the said application wherein it was admitted that there is a contract between the two which has an arbitration clause and due to the dispute between the parties, the matter is ultimately going for arbitration. The appellant objected to Section 9 application and the relief sought therein, as there is no occasion for staying the bank guarantee since there not even a whisper in the said application a fraud is being played by the opposite party (i.e. by present appellant), on the applicant. It was further argued that the bank guarantee is something which is independent and separate to the main contract and execution of which cannot be stayed on the facts and circumstances of the case. 7. In reply to the objections, it was said by respondent no. It was further argued that the bank guarantee is something which is independent and separate to the main contract and execution of which cannot be stayed on the facts and circumstances of the case. 7. In reply to the objections, it was said by respondent no. 1 that there exists a “special equity” in its favour inasmuch as by constructing the factory, the applicant has invested huge resources in completing the work and there is already an amount of more than rupees five crores which is liable to be paid by the defendant (appellant before this Court) and in case the bank guarantee is en-cashed, it will cause irretrievable loss to the applicant. It was also denied that the bank guarantee is an unconditional bank guarantee. 8. In the considered view of this Court, the only ground for interference in such a matter is where a fraud is being committed or a case where irretrievable harm or injustice being caused to the applicant. Apart from making a vague assertion of fraud and irretrievable loss, nothing further has been stated by the applicant (respondent no. 1), before the Court below, which could have justified an interference under Section 9 of the Arbitration Act for restraining the encashment of the bank guarantee. 9. Learned Counsel for the respondent no. 1 Dr. Amit George would argue that a third exception has also been created by the Court which is a case of “special equity”. All the same, what special equity lies in favour of respondent no. 1 has not been elaborated except that a huge amount of money has been invested by them and it is an admitted case of the appellant that they have liability to pay an amount of rupees five crores to the applicant. 10. Law here is absolutely settled which is that except in rare and exceptional circumstances such as where a fraud is being committed or irretrievable loss is being caused or there exists any special equity, the Court would not interfere in encashment of the bank guarantee. 10. Law here is absolutely settled which is that except in rare and exceptional circumstances such as where a fraud is being committed or irretrievable loss is being caused or there exists any special equity, the Court would not interfere in encashment of the bank guarantee. The seminal decision in this case is of the Hon’ble Apex Court in the case of U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. reported in (1988) 1 SCC 174 , where the Hon’ble Apex Court after discussing at length the law on the encashment of the bank guarantees came to the conclusion that ultimately banks must honour their guarantee and the courts can interfere in only exceptional circumstances in a case for encashment of bank guarantee. It was said by the Hon’ble Apex Court as follows: “34. 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 could court should interfere.” 11. Same position was reiterated by the Hon’ble Apex Court in the case of U.P. State Sugar Corporation v. Sumac International Ltd. reported in (1997) 1 SCC 568 . 12. Therefore, in view of this Court, the order dated 8.9.2017 is not justified under the circumstances as the applicant has not been able to show that a fraud is being committed or irretrievable loss is being caused or special equity exists in favour of the applicant (respondent no. 1 before this Court). This being the situation, the impugned order cannot be sustained. 13. Consequently, the present appeal is allowed. Order dated 8.9.2017 is hereby set aside.