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PETITIONER: DWARIKESH SUGAR INDUSTRIES LTD.

       Vs.

RESPONDENT: PREM HEAVY ENGINEEING WORK

DATE OF JUDGMENT:       07/05/1997

BENCH: K.S. PARIPOORNAN, K. VENKATASWAMI, B.N. KIRPAL

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T                   THE 7TH DAY OF MAY, 1997 Present:                Hon’ble Mr.Justice K.S.Paripoornan                Hon’ble Mr Justice K.Venkataswami                Hon’ble Mr Justice B.N.Kirpal Harish N.Salve,  Sr.Adv., Krishan  Mahajan, P.H.Parekh,  Ms. Indu Varma, Advs. with him for the appellant Sudhir Chandra,  Sr.Adv., Manmohan,  Sanjay Raghuvanshi,  R. Sasiprabhu, Advs. with him for the Respondents.                       J U D G M E N T The following Judgment of the Court was delivered: KIRPAL. J.      Special leave granted.      Having been thrawted by orders of the court below in it attempt to  get encashment of the bank guarantees, issued by the State  Bank of  India, Meerut  Cantt. Branch (respondent no.2) respondent  no.l has  led to the filing of this appeal by aggrieved beneficiaries.      The appellant  and respondent  no.1 had entered into an agreement on  27th July, 1994 whereby respondent no.1 was to supply boiling  house equipment  the cost  of which  was Rs. 5.23 crores.  The supply  of equipment  and material  was to start from  15 September,  1994  and  the  same  was  to  be completed by  10th August,  1995, as per the schedule of the supply agreed to by the parties.      According to  one  of  the  clauses  of  the  aforesaid agreement   respondent  no.l  had  agreed  to  furnish  bank guarantees in favour of the appellant. Out of the above six, only four  bank guarantees  were  furnished  including  bank guarantee no.  40/51 dated  1st December,  1994 for a sum of Rs.26,15,000/-  and   bank  guarantee  no.40/47  dated  24th November, 1994  for a  sum of Rs.35 lacs. These are the bank guarantees with which we are concerned in the present case. Bank guarantee no.40/51 was issued to ensure timely delivery of equipment  and supply  by respondent  no. 1. The relevant clauses of the said bank guarantee no.40/51 are as follows:      "In consideration  of the  premises      the        Guarantor         hereby      unconditionally   and   irrevocably

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    undertake to  pay to  the Purchaser      on their  first written  demand and      without  demur   such  a   sum  not      exceeding  Rs.26,15,000/-   (Twenty      six lacs  fifteen thousand only) as      the    purchasers     may    demand      representing 5%  (five per cent) of      the  contract  price,  and  if  the      guarantor fails  to pay  the sum on      demand the guarantor shall also pay      on the sum demanded interest at the      bank lending  rates then prevailing      reckoned from  the date  of  demand      till the date of payment.      2.The guarantor  shall pay  to  the      purchaser on  demand the  sum under      clause 1  above without  demur  and      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  breach(es)      of any  of the terms and conditions      of the  said agreement and secondly      that the right of the purchasers to      recover  from   the  guarantor  any      amount due  to the purchasers 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    Lability   or    that      proceedings are  pending before any      Tribunal  arbitrator(s)   or  Court      with regard  to  or  in  connection      therewith,  and  thirdly  that  the      guarantor shall immediately pay the      aforesaid  guaranteed   amount   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 fact affecting  the      demand, and  lastly that  it  shall      not be  open to  the  guarantor  to      require the  proof of the liability      of the  seller to  pay  the  amount      before   paying    the    aforesaid      guaranteed amount to the purchasers      The other bank guarantee no.40/47 was originally issued for a  sum of  Rs.51,70,000/- for  securing advance payment. The agreement  contemplated the  liability  being  gradually reduced and  on 28th  August, 1995  this bank  guarantee was reduced for  a diminished amount of Rs.33 lacs. The relevant clause of this bank guarantee is as follows:      "In consideration  of the  premises      the        guarantor         hereby      unconditionally   and   irrevocably      undertakes to  pay to the purchaser      on their  first written  demand and      without  demur   such  a   sum  not      exceeding  Rs.51,70,000/-   (Rupees

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    fifty  one  lacs  seventy  thousand      only) as  the purchasers may demand      representing 10%  (Ten per cent) of      the  contract  price,  and  if  the      guarantor fails  to pay  the sum on      demand the guarantor shall also pay      on the sum demanded interest at the      bank lending  rates then prevailing      reckoned from  the date  of  demand      till the  date of payment. Provided      that  liability  of  the  guarantor      hereunder  shall   reduce  to   the      extent  of   the  advance  adjusted      under  clause   13  of   the   said      agreement.      The  guarantor  shall  pay  to  the      purchaser on  demand the  sum under      clause 1  above without  demur  and      requiring the purchasers  to invoke      any  legal   remedy  that   may  be      available to  the  them,  it  being      understood and  agreed firstly that      the purchaser  shall be  the   sole      judge of  and  as  to  whether  the      sellers    have    committed    any      breach(es) of  any of the terms and      conditions of  the  said  agreement      and secondly  that the right of the      purchasers  to   recover  from  the      guarantor any  amount  due  to  the      purchasers shall not be affected or      suspended by  reasons of  the  fact      that any  dispute or  disputes have      been  raised  by  the  seller  with      regard to  their Liability  or that      proceedings are  pending before any      Tribunal,  arbitrator(s)  or  court      with  regard      thereto   or   in      connection therewith,  and  thirdly      that    the     guarantor     shall      immediately   pay   the   aforesaid      guaranteed amount  on demand and it      shall not  be open to the guarantor      to know   the  reasons of or to the      investigate   or to  go   into  the      merits of the demand or to question      or to  challenge the  demand or  to      know any   facts   affecting    the      demand,   and lastly  that it shall      not be  open to   the  guarantor to      require the  proof of the liability      of the  seller to  pay  the  amount      before  paying      the   aforesaid      guaranteed    amount     to     the      purchasers".      According to  the appellant  respondent  no.l  did  not supply the  equipment at site, within the time  allowed, nor replaced any  of the defective items which, according to the appellant, had resulted in the ate commencement of the trial crushing in  the  mill.  It  is  further  the  case  of  the appellant that  it had  to make   direct  purchases of  many parts from other  sources as the respondent no.1  had failed to supply  the equipment  Ultimately by  letter   dated 21st November,   1995 written  to respondent  no.2, the appellant invoked the  bank guarantee.   The  material portion of this

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letter was as follows:      "We wish  to inform  you that   M/S      Prem Heavy   Engineering  Works (P)      Ltd.   Ram Mill, Delhi Road, Meerut      have   failed    to   fulfill   the      condition of  our  agreement  dated      27.7.1994  in   so  far  as  timely      supply   of   the   machinery   and      equipment under order with them .      "As per  clause 14  of  the  supply      agreement   M/s    Prem   -   Heavy      Engineering Works  (P) Ltd., Meerut      has   failed    to   deliver    the      equipments and   its  commissioning      within the scheduled time frame.      Now we hereby invoke the  aforesaid      guarantee for Rs.26,l5,000/-(Rupees      twenty   six lacs  fifteen thousand      only) 5% of the  contract value and      enclose  here   with  the  original      guarantee for  your record.  Kindly      hand over  the Demand  Draft in our      favour payable at Najibabad, Distt.      Bijnor, Uttar  Pradesh towards  the      invocation amount."      As on  28th November  1995 respondent  no.1 had already obtained and ex parte injunction  restraining the encashment of bank  guaranteee, no payment was made to the appellant by the bank.      Respondent   no.1   then   filed   another   injunction application dated  12th January,  1996 with  regard  to  the second bank  guarantee dated  24th November,  1994 which was for a sum of Rs.33 lacs.  It obtained an Ex parte injunction in respect  thereto on  the same day. Being ignorant of this the appellant  wrote a  letter dated  16th January,  1996 to the respondent  bank invokeing  the said  bank guarantee no. 40/47. In the said letter it was stated that respondent no.1 had failed  to deliver  the equipment  as per  the terms  of the agreement  and that  the appellant  had bought equipment from various  markets due to which the advance amount  which had been  paid to  respondent no.1 in respect of which  this bank   guarantee had  been issued, remained unadjusted.  The bank was  accordingly required  to pay  the said  amount  of Rs.33 lacs.      According to  the appellant  it is  only  after    16th January, 1996  that it  became   aware of  the filing of the aforesaid suit  and the  injunction   application    and  it entered appearance  in Court   on  18th January,   1996 even though no   notice   had  been   served on  it.   As per the appellant, there was delay in the disposal of the injunction application, consequently  it approached  the High Court for appropriate directions  and the  Allahabad High  Court  vide order   dated 10th  may, 1996   directed   the  civil Judge, Meerut Cantt,  to dispose  of the suit within the time fixed by it .      By a  detailed order dated 20th August 1996, the Second Civil Judge  (Sr. Division)  Meerut   vacated the  ex  parte injunctions  which   had  been  granted  and  dismissed  the injunction   applications. In arriving at this conclusion it observed that  respondent no.1 had not stated  that the work had been  completed and  nor was  there  any  allegation  of cheating or  fraud   contained in  the plaint which had been filed.   The trial  court referred to a number  of decisions of this  Court  and came to the conclusion that there was no basis, in  law, for  the grant  of any   interim prohibitory

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order.      The appellant  on 22th  August, 1996  again  approached the  respondent   bank  for   the  encashment  of  the  bank guarantees, but  without success.      Respondent no.1  then filed  revision  petition on. 257 of 1996  on 10th  September. 1996  before the Allahabad High Court challenging  the order  dated 20th August, 1996 of the trial court.  single  judge of the Allahabad High Court took up the revision petition  and disposed it of on the same day and after   setting aside the order dated 20th  August, 1996 it remanded  the matter  back to the trial court for a fresh decision but,  at the  same   time, directed  that till  the disposal   of injunction   application  the bank  guarantees in question  shall   not be  invoked  or encashed. The trial court was  directed to  hear the parties within fifteen days of the receipt of the order and to dispose of the injunction application within  fifteen days  thereafter.   Needless  to date, due  to dilatory  tactics adopted  by  respondent  no1 which  is evident from the documents available on the record of this      "As per  clause 14  of  the  supply      agreement   M/s    Prem   -   Heavy      Engineering Works  (P) Ltd., Meerut      has   failed    to   deliver    the      equipments and   its  commissioning      within the scheduledtime frame.      Now we hereby invoke the  aforesaid      guarantee for Rs.26,l5,000/-(Rupees      twenty   six lacs  fifteen thousand      only) 5% of the  contract value and      enclose  here   with  the  original      guarantee for  your record.  Kindly      hand over  the Demand  Draft in our      favour payable at Najibabad, Distt.      Bijnor, Uttar  Pradesh towards  the      invocation amount."      As on  28th November  1995 respondent  no.1 had already obtained and ex parte injunction  restraining the encashment of bank  guarantee, no  payment was made to the appellant by the bank.      Respondent   no.1   then   filed   another   injunction application dated  12th January,  1996 with  regard  to  the second bank  guarantee dated  24th November,  1994 which was for a sum of Rs.33 lacs.  It obtained an Ex parte injunction in respect  thereto on  the same day. Being ignorant of this the appellant  wrote a  letter dated  16th January,  1996 to the respondent  bank invoking  the said   bank guarantee no. 40/47. In the said letter it was stated that respondent no.1 had failed  to deliver  the equipment  as per  the terms  of the agreement  and that  the appellant  had bought equipment from various  markets due to which the advance amount  which had been  paid to  respondent no.1 in respect of which  this bank   guarantee had  been issued, remained unadjusted.  The bank was  accordingly required  to pay  the said  amount  of Rs.33 lacs.      According to  the appellant  it is  only  after    16th January, 1996  that it  became   aware of  the filing of the aforesaid suit  and the  injunction   application    and  it entered appearance  in Court   on  18th January,   1996 even though no   notice   had  been   served on  it.   As per the appellant, there was delay in the disposal of the injunction application, consequently  it approached  the High Court for appropriate directions  and the  Allahabad High  Cour  tvide order   dated 10th  may, 1996   directed   the  civil Judge, Meerut Cantt,  to dispose  of the suit within the time fixed

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by it .      By a  detailed order dated 20th August 1996, the Second Civil Judge  (Sr. Division)  Meerut   vacated the  ex  parte injunctions  which   had  been  granted  and  dismissed  the injunction   applications. In arriving at this conclusion it observed that respondnent no.1 had not stated  that the work had been  completed and  nor was  there any  allicgation  of cheating or  fraud   contained in the palaint which had been filed.   The rtial  court referred to a number  of decisions of this  Court  and came to the conclusion that there was no basis, in  law, for  the grant  of any   interim prohibitory order.      The appellant  on 22th  August, 1996  again  approached the  respondent   bank  for   the  encashment  of  the  bank guarantees, but  without success.      Respondent no.1  then filed  revision  petition on. 257 of 1996  on 10th  September. 1996  before the Allahabad High Court challenging  the order dated 20th August, 1996 of kthe tial court.   single   judge of the Allahabad High Cout took up the revision petition  and disposed it of on the same day and after   setting aside the order dated 20th  August, 1996 it remanded thre matter  back to the trial court for a fresh decision but,  at the  same   time, directed  that till  the disposal   of injunction   application  the bank  guarantees in question  shall   not be invoked  or cencashed. The trial court was directec to hear the prties within fifteen days of the receipt  of the  order and  to dispose of the injunction application lwithin  fifteen days  thereafter.   Needless to dtate, due  to rdilatory  tactics adopted  by fespondent no1 which  is evident from the documents available on the record of this  case, the said injunction application have not been disposed of  the till  with the  result that  the injunction granted by  the single   judge of the High court  vide order dated 10th September, 1996 still continues.      While   allowing  the civil revision  the single  judge in his  judgment did not think it  necessary to refer to the judicial diecisions   which   were  cited before  him.   The court  observed   that  reference  to  the  same    was  not becessary because the trial court, who had observed that the plaint did  no contain  any allegation with regard to fraud, had not  noticed that allegation  of fraud was  cantained in the injuction  application.  The learned judge noticed  that the liability  of bank   under   the guarantee was  absolute and that  it was not supposed  to question  the authority of the benificiary  to encash  the bank guarantee but  observed that the same " could not be the guideline  for allowing the defendant to  encash the   bank guarantee unless there was a finding that  the defendant  was   having   undue enrichment thereby".      The   aforesaid decision  of the  High Court  has  been assailed by  Sh. Harish N. Salve, learned senior counsel for the appellant,  who has  contended that the High Court  fell in serious  error in  ignoring and not in even feferrin g to the decisions of this Court  where the principles  regarding the grant  of injunction   in matters relating to encashment of bank   guarantees  have been clearly spell out.  Had this been done, the learned counsel submits, the High Court could not, in law, have continued with the temporary injunction.      Numerous decisions   this   Court  rendered over a span of nearly  two   decades have  laid down and  reiterated the principles which  the Courts  must  apply  which considering the question  whether to  grant an  injunction which has the effect of restraining the encashment of a bank guarantee. We do not   think  iot necessary  to burden  this   judgment by referring to  all of  them.  Some    of  the    more  recent

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pronouncements on   this   point where the earlier decisions have     been     considered  and   reiterated  are  Svenska Handelsbanken  Vs.   Toubro  Ltd.   Vs.  Maharashtra   State Electricty   Board and  ors. [(1995)  6 SCC  68],  Hindustan Steel Works   Construction  Ltd.   Vs.   G.S.   Atwal &  co. (Engineers) Pvt.  Ltd. [(1995) 6SCC 76] and U.P. State Sugar Corporation Vs.  Sumac   International Ltd.    [(1997)1  SCC 568]. The  gemeral   principle   which has been laid down by this court  has been  summarised in  the case of U.P.  state sugar Corporation’s  case as follows:      "The law  relating to invocation of      such bank guarantees in by now well      ssettled.   When in  the course  of      commercial       dealings        an      unconditional  bank   guarantee  is      given or  accepted, the  beneficial      is entitled to realize suchj a bank      guarantee    in    terms    thereof      ireespective   of    any    pending      disputes.   The bank  giving such a      guarantee is  bound to  honlur,  ir      as per  its terms   irrespective of      any dispute raised by its costomer.      The very  purpose  of giving such a      bank   a   bank   guarantee   would      othrwise be  defeated.   The courts      should,  therefore,   be  slow   in      granting an  injunction to restrian      the  realization  of  such  a  bank      guarantee.  The courts have carvede      out   only two exceptions.  A fraud      in connection   with  such  a  bank      guarantee would   vitiate  the very      foundation     with  such   a  bank      guarantee would  vitiate  the  very      foundation  of   such      a   bank      guarantee. Hence  if thre is such a      fraud of  which    the  beneficiary      seeks to  take the   advantage,  he      can be  restrained from  doing  so.      The second   exception   relates to      case      where   allowing      the      encashment  of   an   unconditional      bank   guarantee  would  result  in      irretrievable harm  or injustice to      one  of   the  parties   concerned.      Since in  most   cases  payment  of      money  under such a bank  guarantee      would   adversely affect  the  bank      and its  customer at whose instance      the guarantee  is given,   the harm      or  injustice  contemplanted  under      this  head   must  be  of  such  an      exceptional    and    irretrievable      nature as  would override the terms      of the   guarantee and the  adverse      effect of such an injunction of the      guarantee and  the   adverse effect      of   such    an    injunction    on      commercial    dealings    in    the      country."      Dealing with   the queation  of franud it has been held that fraud  has to  be an  established fraud.  The following observation   of sir  John Donaldson, M.R. in Bolivinter oil SA V.   Chase  Manhattan Bank  (1984) 1  All   ER  351,  are

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apposite:      "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      threafter 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  wufficient that  rests      on the ujncorroborated statement of      the   customer,  for    irreparable      damage   can be  done  to a  bank’s      credit in the relatively brief time      which   must   clapse  between  the      granting   of  such  an  injunction      and an   application by the bank to      have it charged."           (emphasis supplied)      The aforesaid  passage was  approved and  followed   by this   court in U.P.  coooperative Federation Ltd. Vs. Singh consultants and  Engineers (P) Ltd. [(1988) 1 SCC 174].      The secondly  exception   to the   rule    of  granting injunction, i.e.,  the resulting  of  irretrievable  injury, has to  be such  a  circumstance  which  would    make    it impossible   for the  guarantor to reimburse himself,  if he ultimately  succeeds.   This  will  have  to  be  decisively established and it must be proved to the satisfaction of due Court that  there would  be no  possbility whatsoever of the recoverv of  the amount  from the  beneficiaIy.  by  way  of restitution.      In the  instant case, as has been already noticed there were two  types of  bank guarantees  which were issued. Bank Guarantee No.  40/51 for Rs.26,15,000/- was issued to issues timely y  performance of  the agreement by respondent No. 1. the relevant  terms of this guarantee firstly makes it clear that the that has unconditional and irrevocably undertaken to pay  to pay  to the  appellant,  on  written  demand  and without demand, the amount  demanded it. Secondly, Clause II of the  said guarantee  clarifies that  the payment shall be made  without   demand  and  on  the  undertaking  that  the appellant is  to be  sole judge  whether  the    seller  has committed  any  breach.  Consequently  the  right    of  the appellant to  recover the  guaranteed amount  is not  to  be effected or  suspended by reason of any dispute which can be raised or  pending before the courts tribunals or arbitrator Thirdly   the  guarantor had no right to know the reasons of or to  investigate the  merits of  the demand or to question or to  challenge the  demand or  to know any  fact affecting the demand  and lastly   it  was   not open  to the  bank to require the proof of the liability of respondent No.1 to pay the amount  before paying   the  aforesaid guaranteed amount to the appellant.      The  letter  of  invocation  issued  by  the  appellant demanding the  payment ot  Rs.26,15000/- was  in  accordance with the  terms of  bank guarantee   No.  40/51 and the bank was,  threfore,   under  an   obligation     to  honour  its undertaking   and to  make the  payment . It, however, chose not to  fulfil its  obligation. If the bank could not in law avoid the payment, as the demand had bneen made in terms  of the banjk  guarantee, as  has been done in the present case, then the  court   ought not  to have   issued  an injunction which   had the  effect   of  restraining  the  bank    from

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fulfilling its  contractual obligation  in terms of the bank guarantee.   An injunction  of the court ought not to be  an instrument which   is  used in  nullifying the  terms  of  a contrant,   agreement or  undertaking   which   is used   in nullifying the  terms of  contract, agreement or undertaking which is  lawfully enforceable.  In   its  aforesaid  letter dated 24th   November,  1995 respondent  no.1   had  clearly admitted   that entire  supply had   not been  made. In view of this   also  the High  court    was    not  justified  in granting  an injunction.      Bank guarantee  No.40/97  dated  24th  November,  1994, which had  been   issued to secure the advance of Rs. 129.24 lacs   which had  been   given   by the  appellant, was also similar in  terms to  the earlier  bank guarantee No. 40/51. The main contract between the parties contemplated  that the amount   of bank guarantee shall stand reduced on adjustment being   made.   It is  contended by  Shri  Sudhier  Chandra, learned counsel for the respondents that the full amount was ginen adjusted  and no  amount   remained outstanting   and, therefore, the  bank guarantee  No.40/47 could no longer  be regarded as  alive .  In support   of  this contention,  the learned  counsel relied on the observations of this Court in Larson &  Turbo Ltd.  Vs.  Maharashtrata  state  Electricity Board and  ors. (1995)  6 SCC  68 where  an injunction   was granted wheree the bank guarantee which was issued was to be kept  alive   till  the   successful  completion   of  trial operations.  our   opinion,  this  decision  can  be  of  no assistance to  respondent no.  1 because in Larson & Turbo˜s case (supra)  this Court  found that the guarantee which had been given   by  the  bank  was  to  ensure  only  till  the successful completion of the trail operations and the taking over  of  the  plant.  The  documents  revealed  that    the contractual terms   in  this  regard has been  complied with and after   successful   completion  of the trial operation, the plant   had admittedly been taken over. In  view of this Court   that the terms  of the bank gurantee did  not permit its   invocation   once   the trial   operation   have  been successfully completed.      In the  present case  clause 3  of bank  guarantee  No. 40/47 relating  to adjustment  of the  advance stipulated as follows:      "The  guarantee   shall  come  into      force from  the   date thereof  and      shall remain  valid till  the  full      advance amount  is  adjusted  under      Clause 13  of  the  said  agreement      which   according to the terms  and      conditions of the said Agreement is      stipulated    to     be    adjusted      proportionately from  each bill  of      the Sells against actual deliveries      of the  machinery and  equipment at      site  but   if  the  deliveries  as      aforesaid have  not been  completed      by  the  Sellers  within  the  said      period for  any reason  what soever      the  Guarantor   hereby  undertakes      that the  Sellers shall  furnish  a      fresh or  renewed  guarantee on the      Purchaser’s     proforma  for  such      further period  as the  purchaser’s      may  intirmate  failing  which  the      guarantor   hall    pay   to    the      purchaser’s   a sum  not execeeding      Rs.  51,70,000/-(Rupees  Fifty  one

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    lacs   seventy thousand  only)   or      the  residual   amount  of  balance      unadjusted   advance   left   after      proprotionae     adjustment      in      acccordance with clause 1 above  as      the purchaser may demand."      No plea  was taken  before  the  courts  below  and  no document has bcen shown to us by the  respondents, which can prima ficie  indicate that   the  full   amount to us by the respondents, which  can prima  facie indicate  that the full amount of  advance had  been adjusted under Clause 13 of the main contrant  between  the appellant and the defendant no.1 According to the  appellants, the original guarantee was for Rs. 51,70,000/-  but  the  same,  after  adjustment  of  the advance, in  terms of clause 13 of the main agreement, stood reduced to Rs.33,00,000/- This  amount was still outstanding and, therefore,   the  bank guarantee had not come to an end and was rightly invoked.      Coming to  the allegation  of fraud,  it is an admitted fact that  in the plant itself, there was no such allegation was initially only in the first application for the grant of injunction that  in a  paragraph it  has been mentioned that the  appellant   therein  had  invoked  the  bank  guarantee arbitrarity.  this   application  contains   no   facts   or particulars in support of the allegation of fraud. A similar bald averment  alleging fraud  is also    contained  in  the second application for injunction relating to bank guarantee No. 40/47.  This is  not a case where defendant no. 1 had at any time  alleged fraud  prior to  the filing  of injunction application. The  main contract,  pursuant to which the bank guarantees were  issued, was  not sought  to be  avoided  by alleged fraud,  nor was it at any point of time alleged that the bank   guarantee  was issued  because any fraud had been played by the appellant. We have no manner of doubt that the bald assertion of fraud had been made solely with a view  to obtain   an order   of  injunction .  In the    absencce  of established fraud  and not  a mere  allegation  of fraud and that also    having  been  made    only  in  the  injunction application , the court could not, in the  present case have granted an  injunction   relating to  the encashment  of the bank guarantees.      It is  unfortunate that the High Court did not consider it necessaly  to rrfer to various judicial pronouncements of this Court in which the principles which have to be fullowed while examining  an application  for grant of interim relief have been  clearly laid  down. The  observation of  the High Court that  reference to  judicial decisions  will not be of much importance  was  cleart  a  me1hod  adopted  by  it  in avoiding to  fo11ow and  apply the  law as laid down by this Court. Yet  another scrious  for which was carmnitted by the High Court,  in the  present case,  was not  to examine  the tenns of  the bank  guarantee and  consider the  letters  of invocation which  had been  written by the appellant. If the High Court  had trail the trouble of examining the documents on record, which had been referred to bv the trial court, in its order refilsing to grant injunction, the court would not have granted the interim injunction. We also do not find any justification for  the High  Court in  invoking the  alleged principle of  adjust enrichment  to the facts of the present case and  then deny  the appettant  the Iight  to cncash the bank guarantee.  If the  High Court   had taken  the trouble to see  the law  on the point it would  have been clear that in encashment  of bank  guaranmtee the  applicability of the principle  of undue enrichment has no application.      We are  constrained to  make these  observation    with

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regard to  the manner in which the High Court had dealt with this case  because this  is not  an isolated  cade where the courts, while  disobeying or  not complying  with   the  law laid down  by this  Court ,  have   at time  been liberal in granting  injunctgion   restraining   encalhment   of   bank guarantees.      It   is    unfortunate,   that    notwithstanding   the authoritative the  pronouncements of  this Court,  the  High Courts and the courts subordinate thereto, still seem intent on affording  to this  Court innumerable   opportunities for dealing with  this area  of law, thought by this Court to be well settled.      When a position, in law, is well settled as a result of judicial pronouncement  of this  Court, it  would amount  to judicial impropriety  to say  the least, for the subordinate courts including  the High  Courts  to  ignore  the  settled decisions and then to pass a judicial ordor which is clearly contrary  to   the  setded  legal  position.  Such  judicial adventurism cannot  be permitted  and we  strongly deprecate the tendency  of the subordinate courts in not  applying the settled principles  and in  passing whimsical  orders  which necessarily  has   the  effect   of  granting   wronful  and unwarranted relief  to one   of the parties. It is time that this  tendency  stops.      Before concluding  we think  it appropriate  to mention about the  conduct of the respondent - bank which has chosen not to be in this case. From the facts stated hereinabove it appears to  us that  the respondent   bank   has  not  shown professional efficiaency, to say the least, and has acted in a partisan  manner with a view to help and assist respondent no. 1.  At the  time when  there was no restraint order from any Court,  the bank  was under a legal and moral obligation to honour  its commitments. It, however, failed to do so. It appears that  the bank deliberately draged its feet so as to enable respondent  no.1    to  secure  favourable  order  of injunctgion from  the Court.  Such  conduct  of  a  bank  is difficult to  appreciate We do not wish to say anything more but it  may feel that it will be prejudicial in the event of the appellant taking action against it.      For the  aforesaid reasons this  appeal is allowed. The judgment and  order of  the Allahabad  High Court dated 10th September, 1996 in revision  petition  no.257 of l996 is set aside and the order of the trial court  datded  20th Auguat, 1996 dismissing the injunction application  is restored. The appellant would  be entitled   to cost which  are quantified at Rs.20,000/-.