Standard Chartered Bank v. Heavy Engineering Corporation Ltd. (2020) 4 MLJ 104

9. Standard Chartered Bank v. Heavy Engineering Corporation Ltd.
(2020) 4 MLJ
104
Facts
The parties entered into a contract for the supply of plant and equipment in the
pursuance of which two bank guarantees were furnished against any loss or damage
suffered by the Corporation by reason of breach or failure by supplier in the
performance of the contract. The respondents invoked the bank guarantees on the
ground of the appellant’s failure to supply equipment; due to other contractual
deficiencies and further defective equipment as a result of which work had to
abandoned.
Issues
i) Whether the bank guarantees were correctly invoked in law.
ii) Whether special equities constituted a valid exception to the imposition of an
injunction on bank guarantees
Arguments Advanced
The appellants claimed that the bank guarantees only covered losses arising out of the
supply of plant and machinery. In the present case, it was difficult to determine which
of the losses were caused by the supply failure and which ones resulted from other
contractual deficiencies.
The respondents contended that as per settled precedents, the bank guarantee is an
independent contract between the bank and the beneficiary, and the bank is obliged to
honour its guarantee as long as it is an unconditional and irrevocable one. 1 The
presence of a dispute between the beneficiary and the party is immaterial and of no
consequence.2
Conclusion
The Court noted that the exceptions to the rule brought up by the respondents were
fraud, irretrievable injustice and special equities. Accordingly, once an invocation is
made according to the terms of the bank guarantee and does not fall under any of the
1
Hindustan Construction Co. Ltd. v. State of Bihar & Others., 1999(8) SCC 436.
2
Gangotri Enterprises Ltd. v. Union of India and Others., 2016(11) SCC 720.
above exceptions, it is not open for the Court to interfere with the invocation and
encashment of the bank guarantees.
This case creates a distinction between special equities and irretrievable harm, thus
creating three wide categories of exceptions. This reasoning has been used by courts,
such as in the case of Halliburton Offshore Services Inc. v. Vedanta Ltd., to bring
factors affected by the Covid-19 pandemic under special equities thus allowing
interim relief from the invocation of bank guarantees.
10. Halliburton Offshore Services Inc. v. Vedanta Ltd., MANU/DE/0957/2020;

O.M.P. (I) (COMM) & I.A. 3697/2020
Facts
The parties entered into a contract for the construction of three blocks. Under this
contract, the petitioner, fearing cancellation and thereafter invocation of the bank
guarantees sought an interim injunction.
Issue
Whether force majure constituted a valid exception to the imposition of injunction on
a bank guarantee
Arguments Advanced
The petitioners contended that they had been granted an extension in time to complete
the project. Owing to the nationwide lockdown imposed due to Covid-19, all
industrial activities were affected; accordingly, the petitioner had sought an extension
under the contracts force majure clause.
The respondents contended that the only ground on which the injunction could be
granted was fraud.3 The petitioner’s allegation of fraud was baseless and did not
justify the imposition of an injunction. Further, the contract was to be carried out by
June 2019 and any delay thereafter was unconscionable. The petitioners were merely
trying to take advantage of the Coivd-19 crisis.
Conclusion
3
U. P. Cooperative Federation Ltd v. Singh Consultants and Engineers (P) Ltd., (1988) 1 SCC 174.
The Court found that special equities too were a valid ground for the prevention of
irretrievable injustice between the parties.4 The court further noted that such equities
have been found to be distinct from the principle of irretrievable injustice,5 thus
empowering the court to determine when and in what circumstances these special
equities have occurred. The Court found that in the present case, the unprecedented
Coid-19 pandemic constituted a special equity thus justifying the imposition of the
injunction.
The Court, by reading into the difference between special equities and other two
exceptions has cemented the creation of a new exception to the imposition of
injunctions; resulting in the throwing open of opportunities for courts to apply varying
standards of interpretation on matter that was supposed have minimum court
intervention.
4
U. P. State Sugar Corporation v. Sumac International Ltd., (1997) 1 SCC 568; Svenska Handelsbanken v.
Indian Charge Chrome, 1994) 1 SCC 502.
5
Standard Chartered Bank v. Heavy Engineering Corporation Ltd., (2020) 4 MLJ 104.

Standard Chartered Bank v. Heavy Engineering Corporation Ltd. (2020) 4 MLJ 104

Uploaded by

Copyright:

Available Formats

Standard Chartered Bank v. Heavy Engineering Corporation Ltd. (2020) 4 MLJ 104

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Standard Chartered Bank v. Heavy Engineering Corporation Ltd. (2020) 4 MLJ 104

Uploaded by

Copyright:

Available Formats

9. Standard Chartered Bank v. Heavy Engineering Corporation Ltd.

10. Halliburton Offshore Services Inc. v. Vedanta Ltd., MANU/DE/0957/2020;

You might also like